Labour hit by more bad news on the economy

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The Independent Online

Labour's attempt to use the economy for its final election push took a triple blow yesterday as the high street and housebuilders suffered a slump and a leading business group warned of a "permanent" economic slowdown.

Labour's attempt to use the economy for its final election push took a triple blow yesterday as the high street and housebuilders suffered a slump and a leading business group warned of a "permanent" economic slowdown.

The final economic data released before the polls open today showed the number of visitors to shopping centres last month tumbled 5 per cent on a year ago, making it the worst April since records began.

The report came a day after the CBI said retail sales in April suffered their biggest fall since July 1992 - two months before the humiliation of Black Wednesday that crippled the Tories' reputation on economic policy.

Yesterday Matalan and French Connection, the clothes store groups, and the music giant HMV, became the latest retailers to report falling sales.

SPSL, a firm of retail analysts, said the number of shoppers at Britain's main retail centres, fell 5.3 per cent compared with April 2004. It said consumers were reining in spending because of concerns over rising mortgage bills in the wake of five interest rate rises and increased taxes.

Tim Denison, a director at the group, said: "The figures will be unwelcome and untimely for [Tony] Blair, just a day before the general election. The slowing housing market is the most tangible fulcrum of consumer confidence, but uncertainties over tax changes, fuel prices, council tax and interest rates... are leaving their mark."

Fears that the slowdown in spending is being driven by a cooling housing market rose after a separate survey showed activity in the housebuilding sector contracting last month at its fastest pace for more than six years.

The Chartered Institute of Purchasing and Supply, which polled 150 construction companies, said its index of housebuilding fell to 48.9 from 49.5. Any number below 50 indicates contraction.

It was the second successive fall and broke six years of growth. Sabina Kalyan, at the analysts Capital Economics, said: "The survey suggests that housebuilders are responding to softer house price inflation by trimming workloads."

The chief economist of the Institute of Directors, Graeme Leach, said yesterday the need for greater retirement provision would push up the household-savings ratio to 10 per cent compared with 6 per cent last year. "We face a permanent slowdown in household spending and borrowing, when compared with the past decade," he told the 2005 Credit Show.

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