MANUFACTURING output figures showed their biggest monthly fall for nearly four years as the hi-tech sector came under increasing pressure.

Economists say the manufacturing industry is now effectively in recession after the latest data from the Office for National Statistics (ONS).

The figures showed output slowed markedly during April - dropping 0.9 per cent in the largest monthly fall since August 1997.

Simon Rubinsohn, chief economist at Gerrard's, said: "There can be little doubting that manufacturing industry is to all extents and purposes now in recession."

The ONS said a 3.7 per cent fall in output from electrical and optical equipment industries - in particular the mobile phones sector - was to blame.

Mr Rubinsohn said production output of electrical and optical goods had now fallen ten per cent since peaking in December of last year.

He said: "This huge growth area is now coming under considerable pressure as the build up in inventories of mobile phones and PCs are forcing companies to reduce capacity."

The ONS figures come just days after the Chartered Institute of Purchasing and Supply showed activity in the manufacturing sector was at its worst level for more than two years.

And the slowdown in the manufacturing sector is in sharp contrast to the performance of retailers. Earlier this week, the CBI said shop tills had been busy last month as consumer confidence remained strong.

However, the strength of sterling against the euro and the impact of the US economic slowdown have worked against UK manufacturers.

Alex Scott, of Barclays Stockbrokers, believed the impact of lower interest rates should show through for manufacturers later in the year.

"We are getting mixed signals at the moment. The consumer is borrowing hard and spending hard, but the manufacturing sector, particularly telecoms, is showing signs of difficulties.

''But as we get into the third-quarter of the year, we should see improvements in some areas of the economy as a result of lower interest rates."

He said the latest figures may have been worsened by firms deciding to reduce stock levels at the end of the financial year before placing orders with manufacturers.

The Bank of England's monetary policy committee kept rates at 5.25 per cent on Wednesday.