The pound was sent into a tailspin this morning after figures showed expectations for the UK's industrial production were wide of the mark in March.
Sterling dropped 0.2 per cent against the dollar in mid-morning trading, to $1.2914, as the Office for National Statistics said industrial production shrank 0.5 per cent in March, a larger fall than the 0.3 per cent expected.
Manufacturing was hit hardest, falling 0.6 per cent, compared with analyst expectations of no growth.
The figures suggested much of the fall was driven by pressure from consumers: manufacturing of so-called consumer durables fell 3.9 per cent, although capital goods production also fell 0.1 per cent.
Energy production plunged 4.2 per cent between February and March, thanks in part to the warm weather. That follows a report published yesterday by insolvency firm Begbies Traynor, which suggested 1,700 UK gas and electricity firms are at risk from the unseasonably warm weather, as well as an energy price cap proposed by the Conservatives.
"March’s industrial production figures show that the pressure on consumers’ real incomes from rising inflation is beginning to hurt manufacturers," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"Manufacturing output also was dragged down by a... drop in capital goods production, perhaps indicating that Brexit risk is continuing to subdue business investment."