UK manufacturing output fell 1.5% in January, far worse than had been expected, wiping out a 0.9% rise in December and raising fresh concerns over the health of the UK economy.

The data prompted the pound to shed a further half cent against the dollar, dropping to a fresh two-and-a-half-year low of $1.4832.

The UK economy contracted 0.3% in the final three months of 2012, pending a final estimate from the Office for National Statistics later this month, and a negative reading for the start of 2013 is now odds-on, according to analysts.

Alan Clarke, economist at Scotiabank, said the release is “the penultimate nail in the coffin in terms of triple-dip – it’s pretty much game over now”.

Clarke said only a “stellar” performance from the services sector could now prevent the UK economy from falling into its third recession since the onset of the financial crisis.

Initial signs from that sector are promising, with better-than-expected services PMI data for February announced last week, but consensus forecasts for the broader economy are deteriorating.

“The slump in January leaves a decline in Q1 GDP looking more likely than not – at any rate, some combination of upward revisions/rebounds in industrial production (IP) alongside a revival in services output growth will be required to avert a slide back into a technical ‘triple-dip recession’ in Q1,” said economists at RBS.

“On balance, some improvement in the IP data is likely to materialise in subsequent months, but a fall in GDP in Q1 is very much in the balance – early construction data were also on the soft side.”