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LONDON, Dec 9 (Reuters) - British industrial output fell at its sharpest pace in nearly six years in October and revisions to previous months' data could mean the economy shrank even faster in the third quarter than initially thought.
The Office for National Statistics said on Tuesday industrial output fell 1.7 percent on the month, more than three times the rate predicted by analysts and the biggest fall since January 2003.
That took output 5.2 percent lower than a year ago, the steepest drop since April 1991.
The ONS also revised down output in previous months. Other things being equal, that would mean GDP contracted 0.6 percent in the third quarter instead of the 0.5 percent fall initially reported, it said.
Sterling fell and interest rate futures rose as the figures added to expectations that Britain is heading for a prolonged and painful recession and that interest rates, which the Bank of England has already slashed by 300 basis points since October, have further to fall.
"We look for GDP to contract close to one percent in the fourth quarter of 2008 with a similar outcome for the first quarter of 2009," said James Knightley, an economist at ING. "Consequently, the Bank of England has more work to do with a growing likelihood that UK rates will eventually get down to zero."
Manufacturing output fell much faster than expected -- 1.4 percent on the month -- and for the eighth month running. This was the biggest drop since March 2005 and marked the longest stretch of declines since 1980.
Separately, the ONS said Britain's goods trade gap with the rest of the world widened slightly to 7.75 billion pounds in October.