The timing could hardly have been worse for the government. An economy that was fairly humming along in the last few months of 2014 has come off the boil. Industrial production has faltered. Construction output is down. And the latest news from the high street is that spending was down in March.
The City was quick to play down the 0.5% fall in retail sales. Analysts said it was just a blip, pointing out that excluding a big drop in business at petrol stations, there was a small 0.2% rise in sales last month.
What’s more, they added, the March fall followed a strong February. Over the first quarter of 2015, retail sales volumes were up by 0.9% on the final quarter of 2014, a highly respectable rate of growth.
The fact remains, though, that even on a quarter by quarter basis, spending in the high street and online has slowed from the 2.2% growth posted in the final three months of last year. That’s something of a surprise given the strength of consumer confidence, the fall in unemployment and the halving of the oil price.
Or maybe not. It is possible consumers are saving rather than spending the windfall gains from lower energy prices. That would be the logical thing to do for young adults trying to scrape together a deposit for their first mortgage. But consumers more generally might be wary of a “spend, spend, spend” approach if they thought the boost to their real incomes caused by the fall in inflation to zero was going to be temporary or if they thought zero inflation would lead to less generous pay offers from employers.
But even if retail spending does pick up, it won’t become apparent until after the election. The softer retail sales figures coupled with what’s been happening to industrial production and construction mean that the last big set of economic figures before polling day – next week’s first quarter growth figures – are likely to register a slowdown in the pace of expansion.
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