THE manufacturing sector was on the brink of recession yesterday after official data showed that manufacturing output failed to pick up in May.

Economists said a recession was "virtually unavoidable" after the Office for National Statistics (ONS) said output was flat during the month and the sector contracted by 1.9 per cent between March and May.

But Alan Hall, regional director of manufacturers' organisation EEF, said the North-East was continuing to buck the national trend.

"I know the situation is serious in other parts of the country, and although the North-East manufacturing industry can't be described as buoyant, it has been less affected than the rest of the country," he said.

"There is tremendous pressure on the sector because of high input costs and the inability of companies to lift prices.

"They are under pressure, but there are bright spots on the horizon.

"I believe companies are starting to assimilate the high costs of oil and the fact that sterling is dropping against the dollar has the potential to boost export prices."

Manufacturing output declined by 0.9 per cent in the first quarter and a recession will be confirmed if figures for June fail to show month-on-month growth of about 2.5 per cent in the sector.

The ONS figures will put pressure on the Bank of England to cut interest rates today, even though manufacturing accounts for about 20 per cent of the UK economy.

CBI chief Sir Digby Jones has also led calls for lower borrowing costs because he said the UK economy had lost momentum since the spring and was growing in a disturbing fashion.

Investec economist Philip Shaw said he expects the Bank of England to hold off from cutting rates until next month.