Page last updated at 11:04 GMT, Monday, 3 November 2008

UK manufacturing shrinks again

Manufacturers are suffering as the financial crisis hits the wider economy.

The UK's manufacturing sector shrunk for the sixth month in a row in October but remained above September's low, an industry survey indicates.

The CIPD/Markit manufacturing index stood at 41.5 in October, better than September's 41.2 - the weakest reading since the survey began in 1992.

A reading below 50 suggests the sector is contracting.

Analysts said the survey was not as weak as expected, but this would not dampen calls for a rate cut this week.

"It is not as weak as had been thought, but still weak enough to suggest we will get at least a 50-basis-point interest rate cut from the Bank of England," said George Buckley, economist at Deutsche Bank.

Falling costs

Some analysts are forecasting a bigger rates cut, but Britain's central bank has never cut rates by more than half a percentage point since it was granted operational independence more than a decade ago.

Bank of England policymakers will decide on Thursday whether to cut interest rates from 4.5%.

The Chartered Institute of Purchasing and Supply said October's reading of the index was the second weakest since the survey began in 1992.

Manufacturers also reported a sharp fall in input prices, which suggests that manufacturers will be under less pressure to pass on costs to customers.

Analysts said this could led to easing inflation.

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