Sterling took a further dip today after a January slump in manufacturing raised fears that the UK economy is not out of the woods. The pound at one point lost 1.5 cents to trade at $1.48 after the Office for National Statistics said output had plunged by 0.9 per cent - its sharpest drop since last August. The data surprised the markets as analysts had expected a 0.3 per cent increase, and the discrepancy will revive fears that the UK economy risks entering a second phase of recession this year, having barely emerged into growth at the end of 2009. However, the production slump could be in part blamed on icy weather in January, the ONS said, and the figures contrast with recent surveys suggesting manufacturing activity is forging ahead. Analysts said February's data could yet show a rebound, but were unsure how much of January's fall was down to the weather. 'The figures are very disappointing. It is impossible to blame everything on the weather, but it does seem to be having an impact,' said Philip Shaw, economist at Investec.

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