LONDON (Dow Jones)--U.K. manufacturing output slumped in July, reversing the recent positive trend, led by a drop in the manufacture of transport equipment.

Figures released by the Office for National Statistics Thursday showed that manufacturing output fell 0.3% on the month in July - the first decline since a 0.8% fall in February this year. On the year output rose 0.8%. That compares with a 0.1% rise on the month in June and a 1.0% annual gain.

A Dow Jones Newswires survey of economists had forecast manufacturing output would rise 0.2% on the month and 1.2% in annual terms.

The June data were revised from a 0.2% monthly gain and a 0.9% year-on-year increase, ONS said.

Despite reporting the first drop in five months, an ONS spokes person said that this didn't signify the end of the recent pickup in the sector as the monthly data is considered a volatile measure of output in the sector and could rise once more in the coming months.

Among the six sectors that fell within manufacturing, ONS said the largest fall was a 2.6% drop in transport equipment. That was the largest fall since a 2.8% drop in October 2005 and was driven by a decline in the manufacture of aircraft and the building and repair of ships.

Among the seven sectors that rose, the largest gain was a 1.2% monthly rise in the production of paper, printing and publishing.

The broader measure of industrial output also slipped on the month in July but by a smaller 0.1%. On the year activity picked up from the June level, rising 0.9% compared with July 2006.

Output was weaker than expected, with economists in a Dow Jones Newswires survey forecasting an increase of 0.2% on the month and 1.0% on the year.

In June industrial output was flat on the month, a revision from a previously reported 0.1% rise, while on the year production rose an unrevised 0.8%.

In the three months to July, data that ONS said presents a more reliable picture of the sector as it smoothes out monthly fluctuations, manufacturing output rose 0.8% from the previous three-month period and was 0.9% higher than the corresponding three-month period a year ago.

Industrial production, meanwhile, also rose 0.8% compared with three months earlier and was 0.8% higher compared with a year ago.

Copyright © 2007 Dow Jones & Company, Inc.