British industrial output fell more than expected and at its fastest pace in six months in October, official data showed on Wednesday, raising concerns the economy may be heading for recession after a string of weak business data.
The Office for National Statistics said the fall was due to a broad-based fall in manufacturing and a sharp drop in energy production because of a warm October.
PHILIP SHAW, INVESTEC
It's a grim start to the fourth quarter. It tends to bear out our view that the UK is going to double dip and will re-enter recession. The main question is when, and these figures seem to suggest it could be sooner rather than later.
Overall, we have been of the view that services will keep the economy afloat during the final three months of the year, but given the scale of the fall in industrial production, we are not so sure.
It certainly means that we will get a substantial amount of QE (quantitative easing) over 2012. We are looking for 50 billion pounds in February and also 50 billion pounds in May.
JAMES KNIGHTLEY, ING
The numbers are pretty disappointing.
This report increases the probability that we will see a negative GDP reading for the fourth quarter of 2011, but is unlikely to directly impact on the current Bank of England monetary policy meeting.
Indeed, the BoE is having difficulty making the 75 billion pounds of gilt purchases it announced in October - the November MPC minutes stated that 'market capacity made it difficult to increase the monthly rate of purchases substantially above what was already underway'.
Consequently, we could start to hear increased talk about alternative assets being brought into the facility at some point.
TOM VOSA, NATIONAL AUSTRALIA BANK
These numbers are terrible, we saw falls across the board. And when you look at Germany factory orders, which were much stronger in October, it really seems the UK is not benefiting at the moment from sterling weakness.
We are clearly having an issue accessing export markets relative to Germany, and everyone who's looking for talk of a double-dip recession will probably get more encouragement from these numbers.
What we need to find out is whether it's a temporary blip related to the euro zone confidence shock and it comes back a bit, but in line with retail it tells us it will be a miserable fourth quarter for UK output.
ROSS WALKER, RBS FINANCIAL MARKETS
A bit disappointing. We've taken our steer from the surveys, which have been distinctly shaky in October and November.
The surveys tended to suggest a further deterioration in November. The services numbers and the construction survey evidence was a little bit firmer. Manufacturing was the area where the weakness was most evident.
It looks like the industrial sector could have a rather weak quarter and at this rate it is going to be a drag in the fourth quarter.
Whether that is enough to pull overall GDP down, I would be a little cautious about that at this stage, given that the other survey evidence has been a bit more resilient.
But as a piece of official data that feeds into the output measure of GDP, it is a bit disappointing.
MARK LEE, BARCLAYS CORPORATE
Since the summer our conversations with manufacturers have become increasingly gloomy, as new orders have slowed markedly and many companies struggle with less favourable payment terms and pricing pressures imposed by the larger organisations they supply.
In this climate UK manufacturers are returning to a business strategy that has become very familiar over the past three years; keeping an incredibly tight rein on cost and working capital and only investing where essential.
(Reporting by Peter Griffiths, Olesya Dmitricova, Tim Castle)