LONDON, Feb 6 (Reuters) - British industrial production fell at its fastest annual rate since 1981 in December, data showed on Friday, suggesting the economy shrank even more sharply at the end of last year than first thought.
The Office for National Statistics said industrial production, which makes up 18 percent of gross domestic product, shrank by 1.7 percent in December, taking the annual rate down to -9.4 percent -- the weakest since January 1981.
On the quarter, production was down 4.5 percent, the sharpest contraction since Q1 1974.
The ONS said that all things being equal, December's figures would take 0.1 percentage points off Q4 GDP. The preliminary estimate for GDP for the last three months of 2008 showed a contraction of 1.5 percent.
Manufacturing output fell 2.2 percent on the month, taking the annual rate down to -10.2 percent, the weakest since March 1981. The quarterly rate of -5.1 percent was the weakest since Q1 1974.
The figures show Britain's economy is shrinking fast and will reinforce expectations that the Bank of England will have to cut interest rates further from the current record low of 1 percent and may even have to take unconventional action to support the economy.
Separate figures from the ONS showed producer prices were stronger than expected in January, although the annual rates of inflation are continuing to ease.
Annual output price inflation eased to 3.5 percent from 4.6 percent in December, the weakest since Sept. 2007.