Hopes that British industry could be leading the way out of the recession have suffered a severe setback with official numbers showing the manufacturing output fell by 0.5 per cent between April and May.
At the same time National Statistics revised its first, seemingly promising 0.2 per cent increase for April to a standstill.
Output of “machinery for the production of mechanical power” suffered one of the biggest setbacks in May with an 11.6 per cent fall in output, leaving it 27.6 per cent down year on year.
Machine tools continued a dismal run, falling by another 9.1 per cent to a loss of 20 per cent on a quarterly comparison and one of 38 per cent over the year.
The publishing industry, already suffering from a prolonged advertising decline, was hit by a severe drop in sound recordings.
Another big loser was sugar and confectionery, down by 3.9 per cent on the month, although seven per cent ahead on a three-monthly comparison and by 12.1 per cent on the year.
“This is disappointing,” Brian Hilliard, at Society Generale, said. “Both the key business surveys had been pointing to an increase in May and an upward trend for June.
“Maybe we were getting a bit optimistic, or maybe we are entering a plateau. It is difficult to know.”
James Knightley, at ING, said: “This is a disappointment but, with the manufacturing purchasing managers’ index continuing to rise, there is hope that the worst is over.”
Graeme Allinson, head of manufacturing at Barclays Commercial Bank, took a more robust view.
He said: “Manufacturing seems to be reaching the bottom of the recessionary curve with a marginal 0.5 per cent decline in output between April and May and a slowing rate of 1.8 per cent in the three months to May.
“These figures indicate a continued slowdown in the rate of decline and point the way towards eventual recovery.”
He added: “Sterling remains competitive and will act as a supporting stimulus as manufacturing once again finds its feet.
“The increase in both production levels and demand in India and China are a good indication of international recovery and this can only be good for UK manufacturers.”
The wider Index of production, taking in gas and oil extraction, mining and quarrying and electricity and gas supplies as well as manufacturing, slipped by 0.6 per cent in May to the sharpest three-monthly decline for a year.
The biggest single factor in May was a 1.7 per cent drop in oil and gas production, reversing a strong increase in April.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “Manufacturers still face serious obstacles and the relapse in output in May heightens suspicion that sustainable growth in the sector could remain elusive for some time to come.
“Meanwhile, the marked relapse in industrial production in May reinforces belief that the Bank of England will not only keep interest rates down at 0.5 per cent on Thursday, but also deep into 2010.
“It heightens pressure on the Bank of England to increase its quantitative easing programmed by a further £25 billion to £150 billion this Thursday and the Bank could also well ask the Chancellor for permission to increase the £150 billion ceiling allowed for the programme.”