Page last updated at 11:17 GMT, Tuesday, 6 October 2009 12:17 UK

Shock fall in industrial output

UK oil refinery
Some oil and gas plants were closed for maintenance work in August

UK industrial output fell unexpectedly in August, confounding analysts' expectations of an increase and casting doubt on the strength of the economy.

It fell 2.5% from July, the biggest such fall since January, the Office for National Statistics (ONS) said.

The same measure of output was down 11.2% year-on-year, dashing hopes of a speedy economic recovery.

Manufacturing output, which excludes energy production, fell 1.9% from July and 11.3% year-on-year.

The ONS said there was evidence that factories had been ramping up production in July and then shutting down for holidays in August.

Output was also hit by factories closing for maintenance.

"August's dismal industrial production figures will dampen some of the recent optimism about the economy's apparent bounce-back," said Vicky Redwood, UK economist at Capital Economics.

"A return to positive overall GDP growth in the third quarter [from July to September] now looks less certain."

Call for stimulus

There was a decrease in oil and gas production of 7.7% due to planned maintenance.

But there were big rises in production of wood and wood products and transport equipment.

Industrial production in the three months from June to August fell 0.2% compared with the previous three months and 10.4% compared with the same period last year.

Motor vehicle production, which had given a boost to manufacturing figures in July, fell 2.6% in August.

Earlier, the Society of Motor Manufacturers and Traders (SMMT) announced that sales of new cars rose 11.4% in September compared with the same month last year, helped by the government's scrappage scheme.

Also, the Halifax said that UK house prices rose for the third consecutive month in September and showed the first quarterly increase for two years.

The Bank of England's policymakers begin their latest two-day rate-setting meeting on Wednesday, but are not expected to either change interest rates or their policy of quantitative easing.

The British Chambers of Commerce (BCC) said the manufacturing figures showed that more money needed to be allocated to the quantitative easing programme.

"The weakness in bank lending poses serious obstacles to a sustainable recovery," said David Kern, chief economist at the BCC.

"We urge the MPC to increase the quantitative easing stimulus to £200bn and to take other measures aimed at increasing bank lending."

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