The Bank of England was given the green light to leave interest rates on hold for another month after a survey revealed new signs that the high street spending spree may be winding down.
Retail sales growth fell to its lowest level for 18 months in June, and figures were well below expectations as shoppers were deterred by the World Cup, golden jubilee celebrations and bad weather.
The Confederation of British Industry (CBI) said these one-off effects had exaggerated its figures, but added that the economic uncertainty may be making people more cautious.
City experts said that, despite another set of record lending figures from the Bank of England, its Monetary Policy Committee (MPC) was almost certain to leave rates at four per cent when it meets today.
A survey from the Chartered Institute of Purchasing and Supply (CIPS) showed growth in the buoyant services sector slowed last month as the impact of the World Cup, Jubilee, cancelled orders and spending deferrals hit firms.
The majority of analysts believe the MPC will begin raising interest rates in August to control the consumer boom, fuelled by its decision to cut two per cent off the cost of borrowing last year to protect the UK economy.
The CBI revealed that 29 per cent of retailers saw sales fall below last year's levels in June, with 45 per cent recording an increase.
This resulted in a balance of plus 16 per cent, far below the 25 per cent registered in May and April's 57 per cent.
Grocers were among the few to record an acceleration in sales growth and the sharpest slowdowns were witnessed by firms selling clothing, furniture and carpets who suffered ''negative or no growth''.
Investors suffered heavy losses yesterday as the London stockmarket slumped to its lowest close for more than five years.
About £37bn was wiped from share values as another slide on Wall Street send shudders through UK investors.
By close of trading, the FTSE 100 Index of leading shares was down 154.2 points at just 4392.6
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