Blow to economic recovery hopes: construction output slides and industrial sector stagnates

Recovery hopes were hit with a double setback today as Britain's builders were hit with "a shocker" of a decline and the nation's industrial sector stagnated in November.

The latest official figures come in a week that the Chancellor George Osborne warned the UK's economic fightback still "has a long way to go" and are is at odds with much more upbeat recent survey data.

Construction firms saw a 4 per cent slide in output over the month while growth stalled among manufacturers and the wider production sector, according to the Office for National Statistics.

The figures disappointed City economists, who said hopes of 1 per cent growth or more in the final quarter of 2013 look distant. ING Bank's James Knightley said: "It suggests fourth quarter GDP is likely to come in just below 1 per cent rather than just above."

The data comes amid calls in some quarters for the Bank of England to raise interest rates when unemployment - currently falling sharply - reaches 7 per cent. David Kern, chief economist at the British Chambers of Commerce (BCC) said: "It is a timely reminder that the recovery is not yet secure, and should also dampen the clamour for an early rise in interest rates."

Both construction and manufacturing are still well below their pre-recession peaks. The Chartered Institute of Purchasing & Supply's industry survey's for November signalled rapid growth over the month, fuelling expectations for much stronger growth. Rob Wood, UK economist at Berenberg, said: "The hard data is not keeping pace with the red hot business surveys... Industrial output today disappointed consensus expectations, but the real shocker was construction."

Construction's 4 per cent slide was the sharpest contraction seen in 2013, the ONS said even as housebuilders gear up efforts to meet demand spurred by the Chancellor's Help to Buy scheme. But monthly data can be volatile and the the longer term picture is more positive with production 2.2 per cent ahead of a year earlier in November. Manufacturing output is also 2.8 per cent ahead of a year earlier, the ONS said.