Businesses were hoping for more relief from the threat of a rise in interest rates next week from figures on the service sector, due today, and on manufacturing output on Monday.
The Confederation of British Industry reported a marked slowdown in its survey for March in the annual growth of retail sales volumes. "A further interest rate increase would be inappropriate," said Alastair Eperon of the CBI's distributive trades panel.
The lateness of Easter this year explains part of the year-on-year weakness, with sales of chocolate eggs and DIY goods well below last March's levels. But the underlying trend also pointed to a slowdown in sales growth from its earlier highs.
Eddie George, Governor of the Bank of England, told MPs yesterday the interest rate decision was finely balanced. Growth was slowing, he said, replying to questions from the Treasury committee. He added: "What the debate is about is the timing and the pace. It has to happen fairly soon and it has to go a long way."
Gordon Brown, the Chancellor, repeated his determination to avoid the short term stop-go policies of the past. "I'm aware of the problems that exporters face. But we've got to take a long-term view," he said.
"Industry understands - its workers and managers - that they must be careful about their wage bargaining in order to ensure greater competitiveness, particularly in relation to exports," he added, speaking at a lunch in the House of Commons.
Both the Chancellor and the Governor also claimed the pressure on sterling would ease as the financial markets came to recognise that the Euro would be a strong currency.
Yesterday's CBI survey showed 44 per cent of retailers reporting higher sales in March than a year earlier, while 30 per cent said they were down. The positive balance of 14 per cent was weaker than expected, and well down from February's 33 per cent.
Retailers expected orders to pick up slightly in April, but they were less optimistic than any time since January 1996. The only strong performers in March were furniture and carpet stores and booksellers and stationers.
A separate survey yesterday showed the construction industry was still booming last month. The Chartered Institute of Purchasing and Supply survey of 130 members showed a pick-up in activity, employment and costs with clear signs of bottlenecks in longer delivery times and skill shortages.Reuse content