The beleaguered state of the UK manufacturing sector was brought home yesterday by figures showing the sharpest drop in output for almost three years.
Economists expressed their shock at the performance, which involved a 1.6 per cent slump in production between February and March.
That was the worst figure since June 2002, when output declined by 5.8 per cent in a month affected by Jubilee anniversary celebrations. Beyond that, output had not fallen by as much since January 1995, when there was a 2.3 per cent dip.
The figure caught the City on the hop as most analysts had been forecasting a small rise in output in March.
Investec chief economist Philip Shaw described the performance as "appalling" and said he was likely to revise his forecast for GDP growth to 2.6 per cent from 2.7 per cent. Chancellor Gordon Brown is looking for GDP of between three per cent and 3.5 per cent in 2005.
Mr Shaw said the impact of an early Easter may have been a factor in the weakness, meaning that there remained a chance of a rebound in April.
He added: "Surveys of late have been suggesting toughening conditions in the sector, but nothing to imply a fall of this scale. However, we won't be too hasty to condemn the sector until we have seen April's number."
National Statistics said the collapse - the MG Rover effect is yet to appear in the figures - came after a 2.7 per cent monthly drop in the production of chemicals and manmade fibres and a 2.2 per cent decline in paper printing and publishing.
In an indication of just how bad things are in the sector, manufacturing fell 0.7 per cent in the first quarter compared with the previous quarter for a 0.2 per cent year-on-year rise.
The wider measure of industrial production, which also includes such things as oil production and therefore accounts for just over 20 per cent of GDP, was 1.2 per cent down on a monthly basis against expectations of a 0.1 per cent improvement.
On a year-on-year basis, industrial production, was 1.1 per cent lower.
If all other factors remain equal, the latest data will slash 0.13 per cent from overall GDP growth in the first quarter, estimated at 0.6 per cent quarter-on-quarter.
National Statistics also said factory gate prices rose by 0.7 per cent in April and by 3.2 per cent over the last 12 months. Input prices were higher than forecasts at 0.3 per cent last month.
On a year-on-year basis, input prices rose by 10.4 per cent, in line with predictions.
The statistics office said the monthly increase mainly reflected the 0.2 per cent month-on-month and 49 per cent year-on-year increases in crude oil prices.
Hopes that the grim figures might prove a blip were given some credence by a new survey.
Commenting on the release of April's Purchasing Managers Index data, produced for the Royal Bank of Scotland by NTC Research, RBS economist Mark Smyth said: " Rover's collapse has contributed to a slight decline in employment. Economic activity and new business in the region has been more resilient, growing for the 25th consecutive month, and should return to faster growth following a period of adjustment."
The survey claimed a current upturn in activity in the region continued, with output rising in both the manufacturing and services industries.
However, the rate of growth slowed with the region underperforming relative to the UK average. The seasonally adjusted business activity index fell to 52.2 in April, down from March's eleven-month high of 55.3.
Incoming new business rose for the twenty-fifth successive month in April. Companies linked the latest expansion in new business to the launch of new products and services, and to successful marketing initiatives.
Employment in the region fell slightly in April, after posting a marginal gain in the previous month. The fall in overall staffing levels was principally the result of a cut in manufacturing jobs, in part reflecting the demise of MG Rover. Companies also attributed reduced employment to ongoing cost-restructuring initiatives and the nonreplacement of leavers.