THE US economic slowdown has "quashed" hopes of an upturn in manufacturing, figures released yesterday showed.

The survey by the Confederation of British Industry (CBI) showed a fall in output and business confidence as domestic orders for the past four months fell at their fastest rate since July 1999.

The CBI's quarterly industrial trend survey revealed that 30 per cent of firms said domestic orders were down, against 16 per cent who said they had seen an improvement.

This gave a balance of minus 14 per cent, compared with minus three per cent in January.

The figures come a day after Chancellor Gordon Brown said Britain was well placed to weather world economic instability.

Nick Reilly, chairman of the CBI's economic affairs committee, said the survey had convinced CBI members to press the Bank of England for a further quarter point cut in interest rates.

He said: "We do not wish to overstate the likely scale of the UK slowdown. We are not in the same position as the US and the UK economy remains fundamentally strong, but we do need a quarter point rate cut to limit the downturn."