But the picture of moderating growth painted in the latest figures on national output published yesterday was at odds with a pick-up in bank and building society lending in July, and an unexpectedly sharp acceleration in money supply reported by the Bank of England.
The mixed signals left analysts more convinced that interest rates are likely to be left on hold for some time. Stephen Hannah, chief economist at IBJ, said: "The consumer still seems fairly robust. There would be have to be a very marked slowdown in money supply as a prerequisite for even contemplating a cut in interest rates."
The latest output figures showed that gross domestic product (GDP) grew by 0.5 per cent in the second quarter. Excluding oil and gas, growth was a modest 0.4 per cent. Within the total, manufacturing was up by 0.1 per cent, construction down by 2.6 per cent and services up by 0.6 per cent.
The areas with sharpest growth were oil and gas extraction and electricity, gas and water supply. Output in these sectors was boosted by the cool spring. Excluding the weather effect, GDP growth in the quarter was just 0.3 per cent.
The picture is of an economy which slowed in the second quarter to around trend growth. Compared with a year earlier the economy grew by 2.6 per cent, or 2.4 per cent excluding oil and gas. A year ago, when the Bank of England began to raise interest rates, it was growing at over 3.5 per cent a year.
Consumer spending figures published yesterday showed a slowdown, but spending growth in the quarter was still 0.7 per cent, and the annual rate is 3.8 per cent. Banks and building societies said July consumer lending was the highest this year.
Adrian Coles, director general of the Building Societies Association, said growth in mortgage lending was "slightly surprising" after June's rise in interest rates, but might be a response to "attractive fixed-rate deals on offer".
The Bank of England said the broad measure of money supply - M4 - rose 1.5 per cent in July, taking the annual rate to 10 per cent. Analysts said this was faster than expected but it had been temporarily boosted by inter-bank transactions.Reuse content