Factory output fell 0.1 percent, compared with a 0.3 percent increase in October, the Office for National Statistics said in London today. Economists forecast a 0.1 percent gain, according to the median of 27 estimates in a Bloomberg News survey. On the year, factory production rose 0.1 percent.
The report adds to evidence that the economy is slowing as higher credit costs prompt banks to pare lending to companies and consumers. Speculation that the Bank of England will cut the benchmark interest rate further after a reduction last month pushed the pound to a record low against the euro today.
``It is signaling some moderation in economic activity and continues the idea that the U.K. is on a slowing trend,'' said Paul Donovan, deputy head of global economics at UBS AG in London. ``The bank will cut by a quarter point a quarter.''
Eight out of 13 categories of manufacturing fell on the month, led by electrical and optical equipment, as production of televisions and radios dropped to the lowest since 2002, the statistics office said.
Economic Growth
Manufacturing, which makes up 15 percent of the economy, would need to have increased 0.3 percent in December for factory production to show any gain for the whole of the fourth quarter, the statistics office said.
Avingtrans Plc, a U.K. maker of machinery parts, said on Dec. 18 that its full-year profit will be ``significantly'' below forecasts.
Britain's economy is slowing after contagion from the collapse of the market for U.S. subprime mortgages. U.K. banks now plan to make fewer loans to consumers and companies in the first quarter, threatening to squeeze spending and investment, a Bank of England survey showed on Jan. 3.
Overall industrial production fell 0.1 percent on the month, compared with a 0.5 percent increase in October, the statistics office said.
Growth in U.K. service industries from banks to airlines still unexpectedly accelerated in December, an index by the Chartered Institute of Purchasing and Supply showed on Jan. 4. Overall services account for three quarters of the economy.
British exporters, who make more than half of their sales in the euro area, may also benefit after the pound reached 75.85 pence against the euro today, making their products less expensive there. Demand for goods in the U.S. may increase after the U.K. currency fell to an eight-month low of $1.9501 against the dollar today.
The Bank of England kept the benchmark interest rate unchanged yesterday after cutting it by a quarter point in December to 5.5 percent, in the first unanimous decision for a rate reduction since the aftermath of the Sept. 11, 2001 terrorist attacks.
Policy makers will reduce the rate next month by a further quarter point, according to 35 out of 36 economists in a Bloomberg News survey.
