Manufacturers remained mired in recession during October as output fell for the sixth month in a row, a survey warned yesterday.
The latest purchasing managers’ index for the industry showed a reading of 41.5 - where a score below 50 indicates contraction.
The result - though slightly above gloomy City forecasts - keeps the sector pinned close to the 17-year lows of 41.2 reached in September.
IHS Global Insight’s chief UK and European economist Howard Archer said the survey strengthened the “already compelling” case for deep rate cuts from the Bank of England on Thursday.
Mr Archer, who said there was “a very strong case” for a full one per cent cut, said: “The best thing that can be said about the survey is that it was not quite as dire as feared.”
The Chartered Institute of Purchasing & Supply survey warned of growing weakness in export markets as gloom mounts over economies in the US, Europe and Asia.
New export orders came in at 43.5 - the biggest decline since the aftermath of the 9/11 terror attacks in September 2001.
Backlogs of work among manufacturing firms also fell sharply, suggesting firms were eating into existing workloads to cope with the fall-off in new orders.
Staff were also cut back as employers laid off workers in line with the lower production requirements, keeping the CIPS’ employment index close to the record lows of the previous month.
Roy Ayliffe, CIPS director of professional practice, said: “Conditions for UK manufacturers remained brutal in October, as the turmoil in the world’s financial markets showed no signs of abating.”
The only bright spot for manufacturing firms was cost inflation rising at its slowest pace for more than three years, reflecting sharp drops in the price of oil and other commodities.
This should ease any remaining fears over inflation on the Bank of England’s Monetary Policy Committee (MPC).
Royal Bank of Scotland economist Ross Walker said: “Diminishing oil and commodity costs should continue to filter through to lower factory gate inflation.
“This, in turn, should provide reassurance for the MPC that consumer price inflation is likely to fall sharply ... allowing extensive policy easing.”