"The May figures were disappointing and much weaker than expected by most analysts. Although some decline was expected after the strong April figures, in part due to special factors such as the royal wedding, the very large decline in May highlights the major challenges facing the British economy in the months ahead. In the face of high inflation and weak wage growth, it is clear that consumers are retrenching. On the basis of these figures we reiterate our forecast that GDP is likely to grow by only 0.3% in the second quarter of 2011, much less than the OBR and other analysts are predicting.
“Given the pressures facing businesses and consumers, and with the government’s fiscal austerity programme continuing to bite, it would be a mistake to raise interest rates in the near future. But more must be done to sustain growth and empower businesses to create jobs, export and invest. Productivity has fallen significantly since 2008 and recouping these losses must be a key policy priority."