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Last Updated: Friday, 22 July 2005, 10:08 GMT 11:08 UK
Consumer slowdown hits UK growth
Shoppers in Oxford Street
The UK's high streets have been weathering some stormy times
The UK economy put in its worst performance in more than a decade as a High Street slowdown put the brakes on growth, official figures show.

Provisional data from the Office for National Statistics (ONS) showed GDP grew just 0.4% between April and June.

As a result year-on-year growth stood at 1.7% - its weakest rate since the first three months of 1993.

The slowdown is likely to raise fears that Chancellor Gordon Brown could miss his target of 3% - 3.5% growth in 2005.

Dour forecasts

Analyst Howard Archer of Global Insight said he expected growth to hit just 1.8% this year.

[The figures]... should reinforce the view that the Bank of England will cut interest rates
James Knightley, ING Financial Markets

Mr Archer warned a weak manufacturing sector, subdued exports and business investment as well as the recent London bombing attacks would all take their toll.

He also warned that despite upbeat retail sales figures on Thursday, weakening confidence over job prospects could also unsettle the economy later this year.

"Despite the surprisingly strong growth in retail sales in June, we remain dubious that consumer spending is going to see sustained marked improvement in the near term at least, given that a weakening labour market is now threatening to add to add to the already significant pressures facing the consumer," he added.

Slowing trends

Adding to the gloom was news that the manufacturing sector moved into recession during the period. Manufacturing output contracted 0.7% in the second quarter - following a 0.9% fall in the previous three months.

Meanwhile service industry growth slowed to 0.6% during the quarter, from 0.7% between January and March.

The slowdown underlines a drop in confidence in the sector revealed by the British Chamber of Commerce earlier this month.

"Today's release again highlights the deteriorating economic situation in the UK and should reinforce the view that the Bank of England will cut interest rates next month despite yesterday's stronger than expected retail sales figures," James Knightley at ING Financial Markets said.

Earlier this month the Bank voted narrowly to keep rates on hold in July despite a slowing housing market.

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