The Office for National Statistics has revised its estimate for how much the economy grew in the three months from April to June from 0.2% to zero meaning that the possibility of an official recession (two quarters of negative growth) moves a little closer.
City analysts had expected a fall to 0.1% but were not prepared for no growth at all and annual growth is now just 1.4%.
Calls for an urgent cut in interest rates are likely to increase as businesses and households look to the Bank of England for action to prevent a full scale recession but the Bank of England is still worried about inflation predicted to rise to over 5% later this year and unlikely to start reducing rates until next year.
The gloomy figures revealed deterioration in all parts of the economy. Britain's services sector grew by just 0.2% over the quarter, manufacturing output fell by 0.8% on the quarter, construction output fell by 1.1% and household spending also dipped by 0.1% on the quarter to a two-year low
Meanwhile experts reacted with amazement at shopping sales figures for July, which showed a 0.8% increase.
The figures are so far out of kilter with the rest of the economy that the British Retail Consortium refused to believe them suggesting that “few retailers will recognise this picture”.
The ONS offered discounting at supermarkets as a possible explanation citing Aldi and Lidl as examples of retailers that were having a bumper trading period with double digit increases in turnover as consumers become more sensitive to price.
But traders like Marks & Spencer, Laura Ashley, Next, Carphone Warehouse and even Primark have all reported declining sales.
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