Triple blow for economy underlines IMF fears for recovery

Retail sales falter, manufacturing is flat and public debt stays stubbornly high

The UK's tentative steps towards economic recovery were shaken yesterday by the worst slide in retail sales for a year, sluggish progress on cutting the deficit and a stagnant quarter for the nation's manufacturers.

The triple blow cast a grim backdrop to the International Monetary Fund's warning that the UK was "still a long way from a strong and sustainable recovery" as it called on the Chancellor to halt austerity plans for a year.

Although April's retail figures were hit by an earlier Easter, the 1.3 per cent fall in sales was far worse than expected in a brutal month for supermarkets, as cold weather depressed sales of barbecue food and garden furniture in particular, according to the Office for National Statistics.

The impact of wages trailing well behind the cost of living was also underlined by a 4.1 per cent fall in food sales, bringing the groceries bought by shoppers to the lowest level for almost a decade in volume terms, even as prices surge higher.

Rising food costs are still threatening household budgets despite the latest fall in inflation to 2.4 per cent – largely driven by lower petrol prices – and fuelling the rapid growth of discounters like Aldi and Lidl.

The Barclays economist Blerina Uruci said the figures were "consistent with anecdotal evidence over the past couple of years of a larger proportion of UK consumers shopping in cheaper brand supermarkets".

The retail figures came alongside the latest snapshot of the nation's fragile public finances which showed much less improvement than the headline fall in borrowing to £6.3bn suggested. Stripping out a myriad of one-offs, including the £28bn transfer of Royal Mail pension assets and profits from a Bank of England support scheme last year, as well as £3.9bn in interest transferred to the Treasury from the Bank's gilt holdings through quantitative easing – the underlying deficit was just £1bn lower than last year at £10.2bn.

Income tax takings rose 12.5 per cent compared to last year, although economists suspected that payments were deferred into the current financial year to take advantage of the Chancellor's tax cut for higher earners.

The Institute for Fiscal Studies' Rowena Crawford said: "Receipts in April will have been boosted by high-income individuals shifting income such as bonuses and special dividends from 2012-13 to 2013-14 in anticipation of the fall in the top rate of income tax from 50 per cent to 45 per cent."

The CBI's latest manufacturing figures added to the poor news, with flat growth in the three months to May, even though firms are optimistic of stronger growth in the months ahead.

Capital Economics' Samuel Tombs said the survey was consistent with manufacturing growth falling at an annual rate of 1 per cent, adding: "It remains hard to see how the export-reliant manufacturing sector can look forward to a sustained period of recovery."

Minutes of the Bank of England's latest meeting showed that the outgoing Governor, Sir Mervyn King, maintained his call for an extra £25bn boost to the economy in tandem with two other members, although he was outvoted by the wider committee.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
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

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'