UK manufacturing output declines in May

Tuesday's official data contrast with a string of recent surveys which suggested the sector is in rude health.

The latest quarterly economic forecast by the British Chambers of Commerce showed that manufacturing, which accounts for 10pc of UK output, remained solid in the second quarter, with domestic sales growing at their strongest rate in a quarter of a century.

Most economists said the sector was still likely to have made a very healthy contribution to UK growth in the second quarter. However, others warned that the bell could be "tolling for the UK's economic 'goldilocks' period.

"UK industrial production posted a very large downside surprise, driven by manufacturing, which in fact fits well with the overnight BCC survey, which noted sector capacity constraints, concern about a premature rate hike, and that "the falls in all the export and investment balances act as a timely warning that although growth is stable, challenges facing our recovery still remain'," Marc Ostwald, a strategist at ADM Investor Services.

"Given that the REC Employment survey also highlighted increasing wage pressures, one has to wonder whether the bell is tolling for the UK's economic "goldilocks" period, and by extension for the [pound's] strength.

Data this month are expected to show that the economy, which was still 0.6pc smaller than it was before the financial crisis hit in the first three months of the year, surpassed its pre-crisis peak in the second quarter.

However, a sharp manufacturing decline during the downturn has left manufacturing output well below pre-crisis levels. Output remains 7.6pc below its pre-crisis peak.

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