The mixed figures meant there was no risk of higher inflation in the near future, analysts said. "The day of pressure for an increase in base rates has been postponed further," said Simon Briscoe, an economist at City bank Nikko Europe.
In its latest inflation report, the Bank of England prepared the ground to push for a rise in rates later this year if the economy gathers steam. Although the Treasury will shortly publish a lower forecast for growth this year than the Chancellor's 3 per cent target, most economists fully expect a pick-up as the year progresses.
Total consumer spending grew 0.8 per cent in the first quarter to a level 2.5 per cent higher than a year earlier. This compares with growth of 0.5 per cent a quarter in the second half of last year.
Official statisticians said that spending on services was growing faster than spending on goods. They also revised up their estimate of how fast the output of the service industries grew in the first three months of 1996, to 0.6 per cent.
Separate figures showed that the volume of retail sales rose 0.7 per cent in the three months to April, and were 2.2 per cent higher than the same three months a year earlier. This was their fastest annual growth since February 1995.
The main categories of retail sales grew at a far faster rate over the 12 months. Excluding food stores, sales were up 3.7 per cent. Year-on- year growth was even higher for textiles and clothing and household goods, at 4.7 per cent and 5.7 per cent respectively.
Two categories of spending held the headline figure back. The volume of sales at food stores was only 1.2 per cent higher in February-April compared with a year earlier. "Non-store retailing" - mainly mail order - was down 2.2 per cent.
"Consumer demand is now growing at an above-trend rate," concluded Kevin Darlington, an economist at brokers Hoare Govett.
The contrast with the fortunes of manufacturing could scarcely be wider. Ian Shepherdson, an analyst at City bank HSBC Markets said: "Our consumer boomlet will not be enough by itself to turn manufacturing around." Industry's hopes rest on a recovery in its export markets in continental Europe.
According to the latest survey of industrial trends from the Confederation of British Industry, the balance of firms reporting lower rather than higher orders earlier this month was minus 17 per cent. The balance has been negative for nine months running and remains at its lowest since December 1993.
The balance reporting higher output edged up during the month, as did expectations for future output. But excess stocks built up, too.
A positive balance of 25 per cent of firms said stock levels were more than adequate, the highest recorded in a monthly survey for nearly five years.
Export orders remained weak. The balance reporting higher rather than lower orders was minus seven per cent.
This weakness in the survey evidence was confirmed by yesterday's official figures for GDP in the first quarter.
It showed manufacturing technically in recession, with output falling for the second successive quarter.
In addition stockbuilding continued at an abnormally high level in the first quarter. Although some economists thought this meant the stock overhang would be run down slowly, others believed that there could be a more serious cutback.
"Stocks will remain a drag on output for the remainder of this year," said Adam Cole of James Capel.
So far, consumer spending is the only area showing sustained strength. Investment grew 0.7 per cent in the first quarter, its second quarterly increase after falling during the middle of last year.
A drop in exports due to weak demand in Europe and an increase in imports meant that trade acted as a drag on growth. Altogether, GDP rose 0.4 per cent, the same as the preliminary estimate.Reuse content