The industrial sector reported further weakness in October. Industrial production fell more than expected, by 0.7% m/m (consensus: -0.3%, BarCap: -0.3%) after being flat the previous month. Manufacturing also fell by 0.7% m/m (consensus: -0.3%, BarCap: -0.1%) compared with a downwardly revised increase of 0.1% previously, as eight of the 13 manufacturing sub-sectors reported monthly falls in output.
 
The non-manufacturing sector reported a mixed performance with rising mining and quarrying output and a sharp decline in energy supply. Mining and quarrying increased by 1.8% m/m (-0.7% previously), while energy supply fell by 4.9% m/m driven by a sharp fall in electricity supply. The unseasonably warm weather had a strong negative effect on energy demand as October was the warmest since 2006. Water supply rose by a modest 0.2% m/m.
 
The October data and the available survey information so far indicate that industrial production has made a poor start to Q4 (see chart). Survey information indicates this has been a result of weak domestic demand as well as slowing export orders. With little sign that economic activity will pick up in the near term, we think it is likely that industrial production will worsen further during the remainder of the year. We forecast industrial production to decrease by 0.7% q/q in Q4 with activity expected to fall across the board.
 

source: BarCap