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Industrial production figures fuel recession fears

The continued decline in industry, after a 0.9% fall in October, underlined the fragility of the sector that the government hoped would lead Britain’s recovery

Fears are intensifying that the economy slipped into reverse in the fourth quarter of 2011, after news that industrial production declined for a second successive month in November.

Output from industry – which includes energy and mining, as well as manufacturing – fell by 0.6% in November, to a level 3% lower than a year earlier.

Manufacturers trimmed their output by a less dramatic 0.2% in November, according to the Office for National Statistics, but the continued decline, after a 0.9% fall in October, underlined the fragility of the sector that the government hoped would lead Britain’s recovery.

Chris Williamson, the chief economist at data provider Markit, said: “The data available so far indicate that the economy probably stagnated in the final quarter of last year, with the manufacturing downturn offset by growth in the service sector.”

He warned that the outlook is likely to be darker for 2012, as the downturn in the eurozone takes hold.

“Manufacturers may benefit from rising sales to markets such as the United States and emerging markets such as China, where there are some signs of strong growth appearing. But the big worry is the large eurozone market, which accounts for around two-fifths of UK overseas trade and remains the biggest threat to the UK economy.”

The ONS said the sharpest declines in manufacturing were in the metals, chemicals and paper industries.

The more rapid fall in industrial production was driven by a collapse in oil and gas extraction, which was 16.7% lower than a year earlier.

David Kern, chief economist at the British Chambers of Commerce, urged the Bank of England to use its meeting later on Thursday to announce an extension of its recession-busting quantitative easing policy, to boost demand.

“There is no need for undue pessimism about the future of manufacturing, as many firms preserved their skills base during the recession. But, there will be serious challenges in the months ahead, particularly for those that rely heavily on exports to the eurozone.”

The Treasury is keenly anticipating the first estimate of GDP growth later this month, which will reveal whether the economy contracted in the final three months of 2011. Two negative quarters would mark a double-dip recession.

Indsutrial production figures for the eurozone were also released, showing a better-than-expected decline of 0.1% in November, compared with forecasts for a 0.3% drop. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds