British manufacturing output slumps in January

British manufacturing output slumped 1.5 percent in snow-hit January compared with December, official data showed Tuesday, dealing a fresh blow to the country's hopes of avoiding a triple-dip recession.

The wider measure of industrial production -- which includes mining and quarrying, electricity, gas and water supply -- dropped by 1.2 percent in January from December, the Office for National Statistics added in a statement.

The gloomy news sent sterling tumbling to a new two-and-a-half-year low of 1.4832 against the US dollar. That was the lowest level since 23 June, 2010.

"The pound is the weakest performer today after succumbing to dreadful industrial and manufacturing production data," said research director Jane Foley at trading site

"Usually this is not market moving stuff... However, the pound’s sensitivity to the UK's domestic situation means that any sign the UK is heading towards a triple-dip recession is met with a wave of pound selling."

Analysts' consensus forecast had been for manufacturing and industrial output to have each grown by 0.1 percent in January month-on-month, according to a survey by Dow Jones Newswires.

Industrial output fell as suspended production at the Schiehallion oil platform in the North Sea hit oil and gas extraction.

"January’s figures do little to ease fears that GDP may still be contracting and that the economy could therefore be in a triple-dip recession," said Capital Economics analyst Samuel Tombs.

Recent official data showed that British gross domestic product (GDP) shrank by 0.3 percent in the final quarter of 2012, compared with the previous three months.

Another contraction in the current first quarter of 2013 would place the British economy in its third technical recession since the 2008 global financial crisis.

"Industrial production measure fell 1.2 percent month-on-month in January, a far worse outturn than expected," said Royal Bank of Scotland economist Ross Walker.

"The slump in January leaves a decline in first-quarter GDP looking more likely than not."

In a separate data release on Tuesday, the ONS also revealed however that Britain's trade-in-goods deficit narrowed at the start of the year.

The deficit shrank to £8.2 billion ($12.2 billion, 9.4 billion euros) in January from £8.7 billion in December, That beat analysts' forecasts for a January deficit of £8.9 billion.

IHS Global Insight economist Howard Archer nonetheless argued that the improvement masked a worrying trend.

"On the face of it, the sharply reduced trade deficit in January is better news for hopes that the economy can grow in the first quarter," Archer said.

"But even here the headline figure masks some worrying trends as the reduced deficit occurred because UK imports fell more than exports. This indicates that UK exporters are currently still finding life very tough while domestic demand is weak."