Battered manufacturing industry suffered its second worst month since 1992 during December, a key survey showed today, fuelling expectations of a further, aggressive cut in interest rates on Thursday.

Manufacturing activity last month continued to plummet, although not quite as rapidly as during November, according to the latest CIPS/Markit purchasing managers’ survey of industry.

The survey’s headline index of activity clawed back a little ground, climbing to 34.9 for last month, from a November reading of 34.5, on a scale where any figure under 50 indicates contraction.

But economists said that this modest improvement would do little to ease pressure on the Bank of England to deliver another radical cut in interest rates this week. The Bank is expected to reduce rates from their present, historic low of just 2 per cent to a lower level never seen before in its 314-year history.

The decline in manufacturing last month indicated by the CIPS data marked its eighth monthly contraction in a row.

It came as the survey also indicated that manufacturers cut employment last month at a record pace as a disappearance of new orders signalled bleak prospects for the new year.

Concerns that the Bank may eventually confront deflation, with sustained falls in prices across the economy, were heightened as CIPS reported that manufacturers’ import csots fell for the second month in a row, while the price of goods leaving factories dropped for the first time since mid-2005.

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