As the Treasury kept everyone guessing about the date of the Budget, due to be held at some point between 10 June and early July, bosses and unions called for increases in interest rates to be kept as low as possible. In its budget submission, the TUC said no further rises were needed this year, and an expansionary policy would help investment.
Separately, the CBI is calling for tax rises of pounds 2bn-pounds 3bn in the Budget to keep rate rises to a minimum. It believes the Bank of England should not raise them at all if the pound does not fall from its present level, which the monthly industry survey shows has damaged orders and optimism.
Kate Barker, chief economist for the employers' organisation, said: "If there was no fall in sterling, the Government would meet its inflation forecast without rises in interest rates."
Yet official figures showed higher-than-expected growth in the volume of high street sales in the year to April, confirming the split between consumer strength and manufacturing weakness.
Although revised figures for Gross Domestic Product, the widest measure of economic activity, put its first-quarter increase a touch lower at 0.9 per cent, year-on-year growth was unchanged at 3.0 per cent. The growth was driven by consumer spending and the highest rate of increase in investment spending since the late 1980s.
Retail sales increased slightly during April, with the March figure revised up significantly. The year-on-year growth in high street volumes climbed to 4.7 per cent from 4.4 per cent the previous month.
The strongest-growing categories were household goods and clothing and footwear, up 9.1 per cent and 6.7 per cent respectively in the year to the latest quarter. Consumer spending as a whole, nearly two-thirds of the economy, expanded by 1.0 per cent in the first quarter of this year.
Ms Barker said: "We're expecting robust economic growth and rather low inflation."
The CBI has revised up its prediction for growth this year from 2.8 per cent to 3.1 per cent - still at the low end of the range. It is forecasting interest rates a half point higher by the end of the year. But its monthly survey of manufacturers showed the strong pound was taking a toll on export orders and unbalancing the recovery.
The balance of firms reporting higher rather than lower export orders declined to minus 24 per cent, weak enough to reduce the total order book. The survey showed manufacturing output was growing at a slower pace. Manufacturers have become less optimistic about output during the next four months.Reuse content