Figures published yesterday by the Office for National Statistics showed that manufacturing output tumbled by 1.2% month-on-month in August, confounding City expectations of a 0.4% rise. The tumble, which was broadly based, followed a 0.2% increase in July, and was the steepest monthly drop since January.
The ONS's manufacturing output figures contrast with much more upbeat surveys of activity in the sector from the Chartered Institute of Purchasing and Supply.
Broader industrial production, which includes oil and gas extraction, mining and quarrying, and electricity, gas and water supply as well as manufacturing output, fell by 1.1% month-on-month in August. This was the steepest monthly fall since September last year.
Manufacturing output in August was 0.2% lower than in the same month of 2012, with industrial production down 1.5% year-on-year.
The weak industrial production data coincided with publication by the ONS of trade figures which were also worse than the City had expected. Sterling fell to a five-week low against the euro and a three-week low against the dollar. The pound tumbled below $1.60 in the immediate wake of the industrial production and trade data, while the euro hit a session high close to 84.9p.
The UK's deficit on trade in goods with the rest of the world narrowed from £9.941 billion in July to £9.625bn in August, but was nevertheless much wider than the £9bn figure projected by the City. Taking goods and services together, the UK's overall global trade deficit narrowed from £3.45bn in July to £3.32bn in August.
While economists continued to project that the UK could, in the three months to September, achieve growth slightly in excess of the second-quarter rate of 0.7%, they viewed the new data as disappointing.
Samuel Tombs, UK economist at consultancy Capital Economics, said: "At least other parts of the economy appear to be growing strongly, so GDP (gross domestic product) growth in Q3 still seems to be on track to slightly exceed Q2's 0.7% rise. Nonetheless, (the) industrial production and trade figures dampen hopes both that the recovery is gaining much more pace and that the economy is finally rebalancing."
Mr Tombs noted the UK's trade deficit for the third quarter so far was already wider than that for the whole of the second quarter. He said this widening had been driven by weaker exports.
Howard Archer, chief UK economist at consultancy IHS Global Insight, described the industrial production and trade figures as a "double dose of disappointing news on the UK economy which contrasts with the recent stream of largely robust data and surveys".
He said: "While this could be seen as somewhat of a reality check on the UK economy, (and) not too much should be read into the marked drop in industrial output, especially, and wide trade deficit in August, it does put a dent into hopes that the economy may have grown by as much as 1% in the third quarter. For now, we are sticking to our view that the economy grew by around 0.8%.
"The 1.2% drop in manufacturing output in August is a puzzle as it contrasts with upbeat surveys."