Manufacturing succumbed to its second drop in output in three months in November, sparking warnings from City economists that the British industry could slide into a new recession later this year.

Disappointing figures from the Office for National Statistics showed this morning that a slump in production of consumer durable goods, a sign of flagging household demand, was the driving force behind the worse than expected 0.1 per cent fall in the sector’s November output.

The decline in production came after a 0.6 per cent drop in September, although there was a modest 0.3 per cent gain in October. Output in the latest three months compared with the previous three, seen as a good guide to the underlying trend, fell by 0.2 per cent.

Economists said that despite the gloomy news, manufacturing remained on course to register modest expansion over the final quarter of last year (Q4), barring a serious December slump in output, after it stagnated in the third quarter, with production flat.

But despite that, some analysts sounded warnings that industry’s prospects looked highly vulnerable to an emerging downturn in the global and domestic economies, and that manufacturing could slip into a sectoral recession during coming months.

Paul Dales of Capital Economics said that the sector was likely to eke out a rise in output of 0.2 per cent over Q4. However, he added: “Looking ahead, both the official data and business surveys are now showing at least some signs that the global and domestic slowdowns have started to take their toll on manufacturing activity.

“We do not think that it will be too long until the deterioration in the economic climate both at home and overseas pushes the manufacturing sector into its fourth recession in eleven years.”

Mr Dales added that this would also mean industry contributing to rather than offseting weaker overall economic activity this year. Some economists still hope that a recent sharp slide in the pound, with further falls in sterling expected to follow, will give a sufficient boost to Britain’s competitiveness to allow manufacturing to take up some of the slack from the looming slowdown in much of the rest of the economy this year.

Howard Archer, of Global Insight, argued: “We expect the manufacturing sector to increasingly struggle as it is buffeted by the credit crunch, slowing domestic demand, and elevated oil prices.”

The detail of today’s figures showed that as well as the 1.2 per cent slump in production of consumer durables goods in November, output was also hit by a 0.1 per cent drop in manufature of capital goods such as engineering machinery.

The worst monthly falls in output were endured by electrical and optical equipment makers, who saw production drop 1.4 per cent in the three months to November. Production of televisions and radio tumbled by 7.9 per cent in November, and output of computers fell 4 per cent. There was also tough conditions in the metals industry.

The broader measure of industrial production, which includes the volatile output of the enery and extractive sectors, also registered a 0.1 per cent drop in November, to stand 0.3 per cent up on a year earlier.

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