THE manufacturing sector has slumped to a near three-year low, new figures show.

According to the CBI's monthly industrial trends survey for this month, order books showed their worst position for more than two years.

Of those surveyed, 42 per cent of manufacturers said total orders were below normal, with only 11 per cent saying they were above normal.

This gave a negative balance of minus 31 per cent down on August's figure of minus 29 per cent - "the most pessimistic situation for more than two-and-a-half years going back to March 1999", said the CBI.

There was little hope for beleaguered manufacturers.

The CBI said output was expected to fall further as the global economic slowdown continued to hit exports.

A spokesman said that 96 per cent of replies had been received before last week's terrorist attacks in the US.

Sudhir Junankar, CBI associate director of economic analysis, said: "It is clear that recessionary pressures were tightening their grip on UK manufacturers even before last week's tragic events in America. The last thing they need now is a further deterioration in world trading conditions.

"The Bank of England should stand ready to take further action if conditions continue to worsen."

On Tuesday, the Bank of England made a surprise decision to cut interest rates by 0.25 per cent.

The move, welcomed by the CBI, brought down rates to 4.75 per cent - their lowest level for nearly 40 years.

But Simon Rubinsohn, Gerrard chief economist, said that in the face of so much bleak economic news, a further cut should be expected.

"The combination of rising unemployment and the sharp fall in the equity market is, before long, likely to dent consumer confidence.

"In addition, the recession being encountered by manufacturers is likely to deepen as the downturn in the US economy hits British exports over the next few months," said Mr Rubinsohn.