Britain avoided falling back into recession when official data, first released in April, showed its economy grew 0.3 percent between January and March from the previous quarter.

The Office for National Statistics confirmed the headline number on Thursday and said growth was 0.6 percent higher than a year earlier, also in line with the preliminary figure.

Economists had expected no revision to either figure but they expressed disappointment at the weak underlying picture of the economy from the new details.

“The breakdown of the data is rather disappointing and not that supportive to hopes that the economy is establishing a firmer footing,” said Howard Archer, economist at IHS Global Insight.

“There were declines in investment and exports, which hardly points to an economy rebalancing. Meanwhile, government spending was flat as spending cuts likely increasingly impacted.”

Britain’s government has fended off calls to spend more to boost growth three years into its drive to close one of the European Union’s biggest budget deficits.

On Wednesday, the International Monetary Fund welcomed some signs this year that the economy is slowly healing but stressed it remained weak and called on the government to spend more now on investment to speed up the recovery.

Thursday’s data showed consumer spending ticked up only 0.1 percent on the quarter, its weakest rise since the third quarter of 2011, although it remained one of the economy’s main engines.

The biggest contribution to GDP growth came from an increase in inventories as companies’ stocks piled up in a likely sign of weak demand.

Stock-building added 0.4 percentage points to growth on a measure that aligns GDP output data with the more limited expenditure data available so far. On an unaligned basis, inventories added 0.2 percentage points to growth.

“There is still a significant part of the inventories move that might reflect an unwanted build-up of stocks that will be a downside to growth going forward,” said David Tinsley, an economist at BNP Paribas.

A 0.8 percent fall in exports outweighed a 0.5 percent drop in imports, so that net trade dragged on the economy. Britain is struggling to rebalance its output towards goods exports after it was punished during the financial crisis by its reliance on sectors such as banking.

Business investment shrank 0.4 percent.

Speaking after the GDP release, Bank of England policymaker Ben Broadbent said growth was still below potential even if he was more optimistic about the economy than some of his peers, and that there remained a case for very easy monetary policy.

On the output side of the economy, Britain’s dominant services sector was confirmed as the main source of growth, rising 0.6 percent in the first quarter of 2013 after flat-lining in the last three months of 2012.

Industrial output was 0.2 percent higher, while construction contracted by 2.4 percent.

The ONS also released data on the service sector in March, when its output was 0.2 percent higher than in February.

(Editing by Catherine Evans)

Sales of food plunged 4.1 percent from March, the worst
showing in almost two years.

As the government prepared to face a call from the
International Monetary Fund to do more to help growth, official
data also underscored the size of the budget deficit, which hit
a record high on one measure last month.

Retail sales volumes including automotive fuel fell 1.3
percent in April from March, the Office for National Statistics
said on Wednesday. Compared with a year earlier, sales inched up
0.5 percent, with both readings much weaker than forecast by
economists.

“Retail sales give a timely reminder why it’s too premature
to call the UK as being out of the woods,” said Rob Wood,
economist at Berenberg Bank.

“They highlight the challenges for the UK; households are
struggling as price rises outstrip earnings, sharp government
benefit cuts are going to start showing up in this data soon.”

The pound fell and British government bond prices rose after
the data releases. The IMF will deliver its annual report on
Britain later in the day. Last month, its top officials said
economic weakness had lasted too long and it was time to
consider a new approach.

The government has vowed to stick to its debt-cutting
course.

A persistent minority of policymakers at the Bank of England
appear to take a similarly gloomy view of the economy, despite
forecast-beating growth early this year.

Three out of nine members of the Monetary Policy Committee
voted to restart bond purchases with new money, minutes of their
May meeting showed. Governor Mervyn King was outvoted in his
penultimate monetary policy meeting before retiring, when he
called again for an extra 25 billion pounds of purchases.

Consumer spending, which drives 60 percent of Britain’s
gross domestic product, remains fragile after years of
below-inflation wage growth and government austerity measures.

There was little good news on Britain’s finances either.

Net public borrowing came in at 8.035 billion pounds ($12.2
billion) in April, the first month of the 2013-14 fiscal year.
That was the highest reading for a month of April on record.

Although borrowing excluding financial interventions, known
as PSNB-ex, came in lower than expected, it was flattered by a
3.9 billion pound transfer from the Bank of England. Last year
the bank agreed to return to the finance ministry interest
payments on the gilts bought as part of quantitative easing.

Stripping out that effect, as well as a reduction in April
2012 figures from Royal Mail pension assets, PSNB-ex rose to
10.2 billion pounds in April from 8.9 billion a year earlier.

The government had originally planned to eliminate Britain’s
underlying budget deficit by 2015 with spending cuts and tax
rises, but a weak economy has forced it to extend austerity by
another two years.

Inflation eased to 2.4 percent from 2.8 percent in March, with almost half of that drop coming from weaker petrol and diesel costs. The pound fell and British government bonds rose after the figures.

Combined with recent signs that the economy is gaining traction, the easing in price pressures will be welcome news for Carney. The Canadian, who replaces Mervyn King at the helm of the Bank in July, has a reputation for monetary activism and has stressed the importance of the economy achieving “escape velocity” before stimulus is withdrawn.

Britain’s economy grew 0.3 percent in the first quarter of this year and surveys suggest it has picked up pace since.

The government has tweaked the mandate of the central bank – which aims for inflation of 2 percent – to make it easier to justify tolerating above-target inflation for the sake of economic growth.

“It looks as though the economy will be growing moderately and inflation will not be quite as high as the (bank’s) Monetary Policy Committee fears. That will certainly make Carney’s life easier,” said Philip Shaw, economist at Investec.

“It is a welcome drop in inflation that should give the MPC more flexibility to restart the asset purchase programme if they want to give more stimulus.”

Britain’s central bank bought 375 billion pounds of British government debt between March 2009 and October 2012 to stimulate the economy but has more recently switched its attention to credit easing measures, such as its Funding for Lending scheme to try to revive credit to households and businesses.

BENIGN OUTLOOK

Inflation has been above the central bank’s target since the end of 2009. Statistical effects are likely to cause a tick higher over the summer but the recent weakness in commodity prices and slow earnings growth suggest the longer-term outlook is benign.

Core inflation, which strips out volatile factors such as food, eased to 2.0 percent from 2.4 percent, its weakest rate since late 2009.

The government welcomed the data. “This is good news for families and businesses. Inflation is down by more than a half from its peak,” the finance ministry said in a statement.

Wage growth has been running at less than half the rate of inflation for much of the past five years, eroding Britons’ living standards.

Separate data on producer prices mirrored the picture of easing price pressures. Annual factory gate inflation slowed to 1.1 percent in April from 1.9 percent in March, its weakest rate since September 2009.

Inflation eased to 2.4 percent from 2.8 percent in March,
with almost half of that drop coming from weaker petrol and
diesel costs. The pound fell and British government bonds rose
after the figures.

Combined with recent signs that the economy is gaining
traction, the easing in price pressures will be welcome news for
Carney. The Canadian, who replaces Mervyn King at the helm of
the Bank of England in July, has a reputation for monetary
activism and has stressed the importance of the economy
achieving “escape velocity” before stimulus is withdrawn.

Britain’s economy grew 0.3 percent in the first quarter of
this year and surveys suggest it has picked up pace since.

The government has tweaked the mandate of the central bank -
which aims for inflation of 2 percent – to make it easier to
justify tolerating above-target inflation for the sake of
economic growth.

“It looks as though the economy will be growing moderately
and inflation will not be quite as high as the (bank’s) Monetary
Policy Committee fears. That will certainly make Carney’s life
easier,” said Philip Shaw, economist at Investec.

“It is a welcome drop in inflation that should give the MPC
more flexibility to restart the asset purchase programme if they
want to give more stimulus.”

Britain’s central bank bought 375 billion pounds of British
government debt between March 2009 and October 2012 to stimulate
the economy but has more recently switched its attention to
credit easing measures, such as its Funding for Lending scheme
to try to revive credit to households and businesses.

BENIGN OUTLOOK

Inflation has been above the central bank’s target since the
end of 2009. Statistical effects are likely to cause a tick
higher over the summer but the recent weakness in commodity
prices and slow earnings growth suggest the longer-term outlook
is benign.

Core inflation, which strips out volatile factors such as
food, eased to 2.0 percent from 2.4 percent, its weakest rate
since late 2009.

The government welcomed the data. “This is good news for
families and businesses. Inflation is down by more than a half
from its peak,” the finance ministry said in a statement.

Wage growth has been running at less than half the rate of
inflation for much of the past five years, eroding Britons’
living standards.

Separate data on producer prices mirrored the picture of
easing price pressures. Annual factory gate inflation slowed to
1.1 percent in April from 1.9 percent in March, its weakest rate
since Sept. 2009.

A senior central banker made a similar assessment of the
economy, saying it was starting to mend.

“If we can just sustain it for a few more quarters, we
really can begin to turn the corner again,” Bank of England
deputy governor Paul Tucker said in a newspaper article
published on Wednesday.

“I think there’s a long way to go but there’s certainly
reason for hope.”

The economy grew 0.3 percent in the first quarter and
analysts hope that the signs of a recovery in manufacturing,
which accounts for a tenth of Britain’s gross domestic product,
mean the start of a stronger second quarter.

The Markit/CIPS Manufacturing Purchasing Managers’ Index
(PMI) rose to 49.8 in April from an upwardly revised 48.6 in
March, putting the sector within a whisker of the 50 line that
separates growth from contraction.

Economists had expected a much weaker reading of 48.5.

Britain’s housing market also showed signs of resilience.

House prices inched down 0.1 percent in April from March,
but rose 0.9 percent compared with a year ago – the best growth
in 14 months, data from mortgage lender Nationwide showed.

Moreover, Nationwide said the central bank’s recently
extended credit scheme should buoy the market in coming months.

The Funding for Lending Scheme provides cheap funding to
banks to encourage them to lend to businesses and households and
will now run for an extra year until the end of January 2015.

LONG AND WINDING ROAD

Although the latest data points to an economy slowly
gathering momentum, it also shows that the road to recovery will
not be easy.

Finance minister George Osborne on Tuesday urged the Bank of
England’s new financial regulators not to jeopardise a recovery
by forcing banks to ramp up their capital buffers too quickly.

“It will be a rough ride, but there are chinks of light that
mean a return to modest growth is likely towards the end of the
year,” said Rob Wood, economist at Berenberg Bank.

Meanwhile, he added, the manufacturing sector will probably
continue to weigh on GDP growth for a couple of quarters.

April’s improvement in factory activity was helped by the
first expansion in new orders since January.

New export orders rose for the first time in more than a
year and at the fastest pace since July 2011, on the back of
increased sales to North America, the Middle East, Latin America
and Australia.

But demand from the euro zone – the main market for British
exports – remained weak.

“Domestic demand for manufactured goods is handicapped by
current muted investment intentions and tightening public
spending,” said Howard Archer, economist at IHS Global Insight.

He also noted that Britons’ budgets had come under renewed
pressure from a recent rise in inflation and slow wage growth.

Nonetheless, economists think that the overall improvement
in the economy so far this year after it shrank at the end of
2012 will deter the Bank of England from approving more asset
purchases next week.

More action is likely after the bank’s new governor, Mark
Carney, takes over in July.

Much of the rise has been caused by a banking scandal, high fuel prices, erosion of savings and widening income inequality.

“A perfect storm of factors have come together to create a real buyers’ market at the moment,” said Keith Lewis, a spokesman for the British car industry body, the Society of Motor Manufacturers and Traders (SMMT).

First, the numbers. In the 12 months ending in March, car registrations in Britain rose 7.2 percent compared with the same period a year earlier.

During that period – or an approximation of it, given different reporting schedules – there has been barely any economic growth and unemployment has averaged 7.9 percent.

By contrast, new car registrations in Germany – Europe’s biggest auto market – fell 13 percent in the first three months of 2013, and sales in France fell 15 percent.

So what’s driving car sales in Britain? Microeconomics. Start with the behaviour of savers.

In a bid to boost the economy by encouraging spending and investment, the Bank of England has kept the main interest rate at a record low of 0.5 percent, meaning most savers are losing more to inflation than they are earning in interest.

That results in little incentive to save rather than spend.

Carmakers and dealers have, in the meantime, pushed cheap financing deals and discounts. Keen to shift stock, some have even done so at a loss.

“There are cars now which are available for less than the monthly cost of a TV subscription package,” said Tom Barnard, a director at Japanese carmaker Nissan’s (7201.T: Quote, Profile, Research) UK business.

Carmakers, especially those that have traditionally catered to well-heeled customers, are also luring hard-pressed Britons in another way – by introducing new affordable models to appeal to a much wider range of buyers.

These include several Mercedes C-Class (DAIGn.DE: Quote, Profile, Research) and BMW 3 Series (BMWG.DE: Quote, Profile, Research) models which can be purchased for a monthly payment of less than 300 pounds.

While a few years ago “blue-collar” workers would have bought a car from a mass-market maker, such as Ford (F.N: Quote, Profile, Research) or Toyota (7203.T: Quote, Profile, Research), they can now buy a Mercedes, said Gordon Haining, franchise director at car dealer Lookers.

PUSHED TO BUY

There are a number of other factors behind the rise in sales, which admittedly does come from a low base.

Since the start of 2011, British banks have paid out 8.9 billion pounds in compensation to hundreds of thousands of their customers who were mis-sold Payment Protection Insurance (PPI), averaging almost 3,000 pounds per payment.

Three times as much was paid out last year as in 2011.

PPI was meant to protect borrowers against sickness or redundancy but was often sold to people who didn’t want or need it or who were ineligible to claim.

Given the lack of return from savings, this has proved to be a windfall for car sellers.

“What do I do with that money?” said SMMT’s Lewis. “Do I put it in the bank and get nothing on it? Is it enough for me to move house with or build an extension to my current property?

“No. The options are to go on holiday or to replace a car.”

Strangely, analysts say the latter option is also being boosted by something that at first glance should put people off cars – rising petrol prices.

Tax rises and higher oil prices pushed the average cost of a tank of petrol in Britain to about 90 pounds in 2012 from 70 pounds two years earlier.

This sharp rise has persuaded motorists to splash out on newer and more fuel-efficient cars in order to save money on the running costs in the long term. Newer engines can cut as much as 15 pounds off the fill-up of the average car.

A GOOD RECESSION

For others, fuel prices are less relevant. Although wages have been shrinking in real terms, relatively benign inflation to date and lower borrowing costs have meant that many in work have not felt the real bite of Britain’s downturn.

This is especially true for the top end of earners.

“There is an element of the population that rides above the highs and lows of the economy,” Lookers’ Haining said at an outlet in west London.

It specialises in upmarket Jaguar and Land Rover cars, with prices for the most expensive model on sale – the Range Rover Autobiography – starting from around 100,000 pounds.

He added that London’s thriving property market was providing some support to sales of high-end cars, noting that foreign buyers of expensive homes in the capital would often also buy a car to use when in the country.

Last year many premium carmakers, such as Bentley (VOWG_p.DE: Quote, Profile, Research) and Porsche (PSHG_p.DE: Quote, Profile, Research), enjoyed far stronger sales growth in Britain than the 5.3 percent rise in overall new car sales. And this trend is set to continue, analysts say.

DIMMING PROSPECTS

The prospects for the broader car market in Britain look less bright, as it remains tied to the economy’s fortunes.

Some of the microeconomic drivers, notably the PPI windfall, will dissipate.

On the macroeconomic level, this year’s pick-up in unemployment and rising inflation mean last year’s sales growth – the best in more than a decade – is unlikely to be sustained.

“2013 is going to be a year to forget for consumption,” said Rob Wood, economist at Berenberg Bank. “Wages are being outpaced by inflation.”

The months of increases also mean sales figures will soon start to be judged against a higher baseline. Car registrations plunged between mid-2011 and early 2012.

But at least one factor behind the demand for new cars in Britain should remain: a relative shortage of second-hand cars.

“You don’t have the movement of used cars between markets like you do in continental Europe,” said Colin Couchman, automotive analyst at IHS Global Insight.

“We drive on the different side of the road.”

(Graphics by Vincent Flasseur Editing by Jeremy Gaunt; Editing by Jeremy Gaunt)

Much of the rise has been caused by a banking scandal, high fuel prices, erosion of savings and widening income inequality.

“A perfect storm of factors have come together to create a real buyers’ market at the moment,” said Keith Lewis, a spokesman for the British car industry body, the Society of Motor Manufacturers and Traders (SMMT).

First, the numbers. In the 12 months ending in March, car registrations in Britain rose 7.2 percent compared with the same period a year earlier.

During that period – or an approximation of it, given different reporting schedules – there has been barely any economic growth and unemployment has averaged 7.9 percent.

By contrast, new car registrations in Germany – Europe’s biggest auto market – fell 13 percent in the first three months of 2013, and sales in France fell 15 percent.

So what’s driving car sales in Britain? Microeconomics. Start with the behavior of savers.

In a bid to boost the economy by encouraging spending and investment, the Bank of England has kept the main interest rate at a record low of 0.5 percent, meaning most savers are losing more to inflation than they are earning in interest.

That results in little incentive to save rather than spend.

Carmakers and dealers have, in the meantime, pushed cheap financing deals and discounts. Keen to shift stock, some have even done so at a loss.

“There are cars now which are available for less than the monthly cost of a TV subscription package,” said Tom Barnard, a director at Japanese carmaker Nissan’s (7201.T: Quote, Profile, Research, Stock Buzz) UK business.

Carmakers, especially those that have traditionally catered to well-heeled customers, are also luring hard-pressed Britons in another way – by introducing new affordable models to appeal to a much wider range of buyers.

These include several Mercedes C-Class (DAIGn.DE: Quote, Profile, Research, Stock Buzz) and BMW 3 Series (BMWG.DE: Quote, Profile, Research, Stock Buzz) models which can be purchased for a monthly payment of less than 300 pounds ($460).

While a few years ago “blue-collar” workers would have bought a car from a mass-market maker, such as Ford (F.N: Quote, Profile, Research, Stock Buzz) or Toyota (7203.T: Quote, Profile, Research, Stock Buzz), they can now buy a Mercedes, said Gordon Haining, franchise director at car dealer Lookers.

PUSHED TO BUY

There are a number of other factors behind the rise in sales, which admittedly does come from a low base.

Since the start of 2011, British banks have paid out 8.9 billion pounds in compensation to hundreds of thousands of their customers who were mis-sold Payment Protection Insurance (PPI), averaging almost 3,000 pounds per payment.

Three times as much was paid out last year as in 2011.

PPI was meant to protect borrowers against sickness or redundancy but was often sold to people who didn’t want or need it or who were ineligible to claim.

Given the lack of return from savings, this has proved to be a windfall for car sellers.

“What do I do with that money?” said SMMT’s Lewis. “Do I put it in the bank and get nothing on it? Is it enough for me to move house with or build an extension to my current property?

“No. The options are to go on holiday or to replace a car.”

Strangely, analysts say the latter option is also being boosted by something that at first glance should put people off cars – rising petrol prices.

Tax rises and higher oil prices pushed the average cost of a tank of petrol in Britain to about 90 pounds in 2012 from 70 pounds two years earlier.

This sharp rise has persuaded motorists to splash out on newer and more fuel-efficient cars in order to save money on the running costs in the long term. Newer engines can cut as much as 15 pounds off the fill-up of the average car.

A GOOD RECESSION

For others, fuel prices are less relevant. Although wages have been shrinking in real terms, relatively benign inflation to date and lower borrowing costs have meant that many in work have not felt the real bite of Britain’s downturn.

This is especially true for the top end of earners.

“There is an element of the population that rides above the highs and lows of the economy,” Lookers’ Haining said at an outlet in west London.

It specializes in upmarket Jaguar and Land Rover TAMOJL.ULcars, with prices for the most expensive model on sale – the Range Rover Autobiography – starting from around 100,000 pounds.

He added that London’s thriving property market was providing some support to sales of high-end cars, noting that foreign buyers of expensive homes in the capital would often also buy a car to use when in the country.

Last year many premium carmakers, such as Bentley (VOWG_p.DE: Quote, Profile, Research, Stock Buzz) and Porsche (PSHG_p.DE: Quote, Profile, Research, Stock Buzz), enjoyed far stronger sales growth in Britain than the 5.3 percent rise in overall new car sales. And this trend is set to continue, analysts say.

DIMMING PROSPECTS

The prospects for the broader car market in Britain look less bright, as it remains tied to the economy’s fortunes.

Some of the microeconomic drivers, notably the PPI windfall, will dissipate.

On the macroeconomic level, this year’s pick-up in unemployment and rising inflation mean last year’s sales growth – the best in more than a decade – is unlikely to be sustained.

“2013 is going to be a year to forget for consumption,” said Rob Wood, economist at Berenberg Bank. “Wages are being outpaced by inflation.”

The months of increases also mean sales figures will soon start to be judged against a higher baseline. Car registrations plunged between mid-2011 and early 2012.

But at least one factor behind the demand for new cars in Britain should remain: a relative shortage of second-hand cars.

“You don’t have the movement of used cars between markets like you do in continental Europe,” said Colin Couchman, automotive analyst at IHS Global Insight.

“We drive on the different side of the road.”

(Graphics by Vincent Flasseur Editing by Jeremy Gaunt; Editing by Jeremy Gaunt)

Retail sales volumes slipped 0.7 percent on the month after strong growth in February to stand 0.5 percent lower on the year, the Office for National Statistics said on Thursday.

The broader picture for British consumers is still weak, with spending under pressure from inflation that is outstripping meagre wage growth.

But Thursday’s data did show that retail sales were 0.4 percent higher in the first three months of 2013 than the last three months of 2012. This suggests Britain’s economy may have eked out modest growth in the first quarter of 2013, which it needs if it is to avoid its third recession in less than five years.

“For Q1 as a whole, the numbers were marginally positive, so that gives us some hope that we may be able to avoid a contraction in Q1 GDP,” said Peter Dixon, economist at Commerzbank.

There was little immediate market reaction to the data, which was broadly in line with expectations.

Economists had expected a fall in retail sales volumes, following strong growth in February due to a rebound from earlier snowy weather, and the ONS said that the coldest March since 1962 seemed to have kept shoppers at home.

Non-food sales fell 4.0 percent in March, their biggest monthly drop since January 2010, and this was only partly offset by the biggest rise since March 2009 in the smaller ‘non-store retailing’ category, which includes online shopping.

“Feedback from department stores, clothing stores and household goods stores suggested that sales were dampened by the weather, as they prepared their stores for the spring season,” the ONS said.

Britain’s second-biggest department store group Debenhams (DEB.L: Quote, Profile, Research) said on Thursday that January snow had contributed to a fall in profit in the six months ending in early March and forecast better trading in the coming months.

Earlier figures from the British Retail Consortium had painted a relatively rosy picture, with 3.7 percent annual growth in the value of retail sales in March. But the ONS said the value of retail sales was up just 0.1 percent on the year.

(Additional reporting by Paul Sandle. Editing by Jeremy Gaunt.)

Retail sales volumes slipped 0.7 percent on the month after
strong growth in February to stand 0.5 percent lower on the
year, the Office for National Statistics said on Thursday.

The broader picture for British consumers is still weak,
with spending under pressure from inflation that is outstripping
meagre wage growth.

But Thursday’s data did show that retail sales were 0.4
percent higher in the first three months of 2013 than the last
three months of 2012. This suggests Britain’s economy may have
eked out modest growth in the first quarter of 2013, which it
needs if it is to avoid its third recession in less than five
years.

“For Q1 as a whole, the numbers were marginally positive, so
that gives us some hope that we may be able to avoid a
contraction in Q1 GDP,” said Peter Dixon, economist at
Commerzbank.

There was little immediate market reaction to the data,
which was broadly in line with expectations.

Economists had expected a fall in retail sales volumes,
following strong growth in February due to a rebound from
earlier snowy weather, and the ONS said that the coldest March
since 1962 seemed to have kept shoppers at home.

Non-food sales fell 4.0 percent in March, their biggest
monthly drop since January 2010, and this was only partly offset
by the biggest rise since March 2009 in the smaller ‘non-store
retailing’ category, which includes online shopping.

“Feedback from department stores, clothing stores and
household goods stores suggested that sales were dampened by the
weather, as they prepared their stores for the spring season,”
the ONS said.

Britain’s second-biggest department store group Debenhams
said on Thursday that January snow had contributed to a
fall in profit in the six months ending in early March and
forecast better trading in the coming months.

Earlier figures from the British Retail Consortium had
painted a relatively rosy picture, with 3.7 percent annual
growth in the value of retail sales in March. But the ONS said
the value of retail sales was up just 0.1 percent on the year.

The Office for National Statistics said on Wednesday that the main jobless rate rose to 7.9 percent in the three months ending in February – the highest rate since the three months to August 2012, when it was also 7.9 percent.

The Bank of England, meanwhile, indicated that it remained some way from giving the UK’s flatling economy additional help to create jobs.

Minutes of the bank’s April policy meeting showed it remained split this month on whether to restart asset purchases to boost economic growth, with no sign that divisions between policymakers are narrowing.

The euro hit a one-month high against sterling after the jobs data put pressure on the British currency.

“A lot of the froth and really good news we had over the last year on jobs is becoming exhausted, which shouldn’t be a surprise when there is not much growth around,” said Alan Clarke, economist at Scotiabank.

Britain’s employment growth in the past year has puzzled policymakers and raised questions over how much longer its relative strength can be sustained without a pick-up in the economy.

One way employers have been able to keep staff is by limiting pay rises.

The ONS said average weekly earnings growth including bonuses slowed to 0.8 percent in the three months through February compared with a year earlier. Excluding bonuses, pay grew by 1.0 percent – the smallest rise since records began in 2001.

The ONS said the annual growth in weekly wages excluding bonuses has been below price inflation since late 2009, squeezing vital consumer spending.

Worries about inflation are also weighing on central bankers.

Those opposed to more asset purchases this month said for the first time that they were concerned more stimulus could exacerbate a recent upward drift in inflation expectations, as well as weaken sterling further.

In another sign of pessimism, the Bank of England minutes said that the Funding for Lending Scheme – which the authorities launched in the middle of last year to boost bank lending – was having only a small impact so far on increasing lending and had a diminishing impact on improving credit conditions.

Policymakers said they were open to expanding it further.

In the meantime, prospects for many jobseekers look precarious.

Although the number of people claiming jobless benefit fell by 7,000 last month, the number of those without a job on the wider ILO measure grew by 70,000 in the three months ending in February to 2.563 million.

(Editing by Jeremy Gaunt)