Snow �chilled UK manufacturing output�

Hopes of a stronger economic recovery in the first quarter were dented today after official figures revealed a sharp fall in manufacturing output during snowbound January. Industrial production fell by 0.4 per cent compared with the previous month - much worse than the 0.3 per cent rise pencilled in by economists.

Within the sector, the manufacturing industry suffered an even bigger 0.9 per cent decline between December and January in what marked the first month-on-month fall since last August, according to the Office for National Statistics (ONS).

January's freezing weather conditions were largely to blame for the worse-than-expected figures, which called an abrupt halt to the revival seen at the end of last year. Manufacturing activity had surged by 0.9 per cent in December, which also affected the month-on-month comparison in January.

David Kern, chief economist at the British Chambers of Commerce (BCC), warned that the January manufacturing figures would deal a "serious" blow to the economy's performance in the first quarter.

"The new figures were worse than expected, even after making allowances for the adverse effect of January's bad weather," he said.

He added: "There is now a serious possibility that gross domestic product (GDP) in the first quarter of this year will show a slowdown compared with the last quarter of 2009."

January's snow came as an unwelcome hindrance to Britain's recovery efforts, with the retail sector and housing market taking a hit from the adverse conditions. Recent trade figures were dismal after the snow caused the biggest plunge in exports for more than three years during January - a £1.4 billion or 6.9 per cent fall - which saw the trade gap widen to a mammoth £8 billion.

But there are hopes that February and March will be better for the economy as the weather improved. Recent industry data from the Chartered Institute of Purchasing & Supply (CIPS) found that expansion in the manufacturing sector hit a 15-year high last month, suggesting January may have been a blip in recovery.

Howard Archer, economist at IHS Global Insight, said: "Just as December's 0.9 per cent jump in manufacturing output overstated the sector's strength, so January's 0.9 per cent drop overstates its weakness.

"The overall impression we get from the recent data and survey evidence is that manufacturers are currently seeing a reasonable, but far from spectacular pick-up in activity after a largely dire 2009 as they benefit from leaner stock levels, improved competitiveness in both domestic and foreign markets stemming from the weak pound, and recently firmer demand in key overseas markets."

However, there are fears that the poor performance in January will have proved too much of a drag on GDP.

Jonathan Loynes, at Capital Economics, cautioned: "Even 0.5 per cent monthly rises in both February and March would leave a quarterly gain similar to that in the fourth quarter of 2009, so industry now looks unlikely to drive any significant pick-up in GDP growth in the first quarter."

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