British consumer spending has turned out to be significantly weaker than policymakers had expected, Bank of England (BoE) Governor Mervyn King said today.
But Mr King said that it was too early to say that the slowdown was permanent because of difficulties in assessing economic data between Christmas and Easter and so the Monetary Policy Committee was hedging its bets.
"In the near-term, the pace of consumer spending has slowed quite markedly from what it was and what we thought it was going to be," Mr King said in evidence to Parliament's Treasury Committee.
The Bank of England has held interest rates at 4.75 per cent for seven months running, and analysts are divided over whether the central bank will hike rates again in the next few months.
Many economists say growing signs that consumer spending, which policymakers have identified as a key downside risk, has almost ground to a halt will stay the BoE's hand.
"It looks as if both in the fourth quarter of last year and again in the first quarter of this year that consumer spending will not be growing at anywhere near the rate it was," Mr King said.
But he noted there had been no weakening in the determinants of consumer spending such as income growth - which suggested the slowdown in retail sales could be temporary.