Industry shines in otherwise hazy vista for UK economy

* Industrial, factory output top all forecasts in Sept

* Trade deficit narrows for first time in 5 months

* Figures likely to cheer BoE (Shenzhen: 000725.SZ - news) officials after rate hike

* But construction output sinks, retailers slump

(Adds next week's data, Budget)

By Andy Bruce and Alistair Smout

LONDON, Nov 10 (Reuters) - British industry had its

strongest month so far this year in September, but more signs of

strain on consumers and a plunge in construction were reminders

that the economy looks set for a difficult 2018 as Brexit

approaches.

The figures published on Friday suggested manufacturing may

help to counteract a consumer-led slowdown and offered some

vindication to the Bank of England which last week raised

interest rates for the first time in more than 10 years.

"Stronger global growth and the effect of the weaker pound

seems to be finally showing through in the UK manufacturing

numbers," said ING economist James Smith.

The Office for National Statistics also announced a 1.6

percent monthly drop in construction, while separate figures

published on Friday showed British shops suffered their worst

October for sales in a decade.

"Given that manufacturing represents a relatively small

share of the UK economy, the persistent weakness in consumer

spending is a bigger consideration for the Bank of England,"

Smith said.

Most economists polled by Reuters think Britain's economy

will slow next year, in large part due to uncertainty created by

a lack of progress in talks on the terms of Britain's divorce

from the European Union.

But next week's data on wage growth, inflation and retail

sales will offer a more complete picture of an uneven economy

around which finance minister Philip Hammond must engineer an

annual budget, due on Nov. 22.

NO CHANGE TO GDP VIEW

The ONS said Friday's data backed up its preliminary

estimate of growth of 0.4 percent in the third quarter, picking

up a bit from earlier in 2017 but still slower than the rate in

the euro zone.

Industrial and manufacturing output shot up by a monthly 0.7

percent in September, the fastest growth for each sector since

December last year and above all forecasts in a Reuters poll of

economists, which pointed to a reading of 0.3 percent for both.

Industrial output, which includes manufacturing, accounts

for 14 percent of Britain's economic output.

Figures for the much bigger services sector are due on Nov.

23.

For the third quarter as a whole, there was little change to

estimates for industrial, manufacturing and construction output

that appeared in the ONS' preliminary economic growth estimate.

Until now, the official readings of manufacturing have

tended to show a weaker picture for the sector than upbeat

surveys over 2017.

Separately, the ONS said Britain's goods trade deficit

narrowed by much more than expected to 11.253 billion pounds in

September from 12.350 billion, helped by a rise in exports.

Economists polled by Reuters had expected 12.8 billion.

That was not enough to prevent a deterioration in Britain's

trade performance in the third quarter, however, which looks

likely to be a sizeable drag on economic growth.

Samuel Tombs, an economist with Pantheon Macroeconomics,

said the narrowing of the deficit in September almost entirely

reflected an improvement in trade in erratic items.

Until now, there has been little sign of any big boost to

British exports from the sharp fall in the value of the pound

that followed last year's Brexit vote.

(Editing by Emelia Sithole-Matarise)