Sarah Arnott: All the signs point to another big slowdown

As the IMF revised downwards its growth forecasts for the British economy, a slew of domestic data did little to dispel the sense of foreboding yesterday. House prices fell by 0.6 per cent between May and June, which was the fourth decline in five months, according to the Halifax. And it is not just the property market showing signs of strain. The National Institute of Economic and Social Research, in its monthly estimate for gross domestic product (GDP), said that growth had slowed to 0.7 per cent over the three months to June, compared with 0.9 per cent in the three months to May. The rate was dragged down by month-on-month declines in both April and June. The Bank of England's decision to hold interest rates at 0.5 per cent also added to the uncertainty. While the Bank's decision came as no surprise in the City, it nonetheless confirmed that policymakers remain more concerned about growth than inflation.

However, it was not all bad news. Latest industrial production data showed growth of 0.7 per cent in May, with manufacturing expanding by 0.3 per cent. Industrial production may account for only 17 per cent of Britain's GDP, but a strong rebound in manufacturing can only be good for an economy trying to rebalance itself away from financial services and its reliance on state spending.

Sadly, such sprightly industrial output may simply be a laggard, rather than a contradiction of other gloomier indices. Forward-looking surveys of purchasing managers already hint that the growth spurt is tailing off, and new orders are slowing as the export-led recovery gets the cold shoulder from the enfeebled eurozone.