Consumers keep up the spending spree

AS MANUFACTURING slid into recession in the first three months of this year, consumers increased their spending at the fastest pace since the late 1980s.

New figures for gross domestic product showed slightly higher growth than first estimated, but confirmed that the weakness of industry and exports is slowing the economy.

The signs of slowdown left a majority of City experts confident that the Bank of England will not have to raise the cost of borrowing again, despite the split between buoyant consumer spending and services on the one hand and sagging exports and manufacturing industry on the other. Rising pay claims are seen as the last possible source of danger on the interest rate front.

The upward revision yesterday to GDP growth, from 0.4 per cent to 0.5 per cent in the first quarter, and from 2.8 per cent to 2.9 per cent year- on-year, was exactly as expected.

Details showed consumer spending still growing at an annual pace of 5.1 per cent, the highest since the end of 1988. Investment spending was strong too, up 5.5 per cent compared with a year earlier.

However, government spending fell slightly in real terms, while the widening gap between exports and imports lopped 1.8 percentage points off the overall growth rate. This was the result of the widest trade deficit, in constant pounds, since the middle of 1993.

"It is not clear whether the economy's landing will be soft or hard, in view of the two conflicting forces," said Kevin Darlington, an economist at ABN-Amro.

The industry breakdown showed that while manufacturing has officially moved into recession, services have started to slow too. The quarterly increase in their growth was, at 0.7 per cent, the lowest for a year and a half and revised down from the earlier figure of 0.8 per cent.

The City's doves were swift to pounce on this bit of the evidence. "It suggests a broad-based slowdown in activity," said Nick Vaughan of Barclays Capital.

The Bank of England's Monetary Policy Committee gets its next chance to vote on interest rates in two weeks' time, and none of the figures due before then is expected to sway the vote in favour of an increase. The latest published minutes showed a 5-3 majority against an increase in April, and there was also no change earlier this month.

The arrival in June of John Vickers, the Bank's new chief economist and the final member to join the MPC, alters the arithmetic slightly. Professor Vickers, an Oxford academic, is an unknown quantity but suspected to be a dove because of his expertise on industry.

Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
Life and Style
The veteran poverty campaigner Sir Bob Geldof issues a stark challenge to emerging economies at the Melbourne HIV/Aids conference
Arts and Entertainment
Benedict Cumberbatch and John Malkovich talk Penguins of Madagascar at Comic-Con
comic-con 2014Cumberbatch fans banned from asking about Sherlock at Comic-Con
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
filmGuardians Of The Galaxy should have taken itself a bit more seriously, writes Geoffrey Macnab
Sir Chris Hoy won six Olympic golds - in which four events?
Life and Style
People may feel that they're procrastinating by watching TV in the evening
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Graduate Recruitment Resourcers - Banking Technologies

£18000 - £25000 per annum + OTE £40,000: SThree: Huxley Associates are looking...

Associate Recruitment Consultant - IT

£20000 - £25000 per annum + OTE £40,000: SThree: Computer Futures has been est...

Business Analyst

£300 - £350 per day: Orgtel: Job Title: Business Analyst Rate: £300 - £350 per...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform