Britain's economy grew by only 0.5 per cent in the first three months of this year - the weakest outcome for any quarter since 0.4 per cent in the Spring of 2002 - National Statistics reported yesterday, revising its earlier estimate down by 0.1 per cent.
The news coincided with a slight upward move in manufacturing pay settlements. The EEF said they averaged 2.8 per cent in the three months to April.
At the same time it revised its estimate for the three months to March up to 2.8 per cent from 2.7 per cent.
City economists concluded that the Bank of England is highly unlikely to change its official interest next month from the present 4.75 per cent.
NS said that service activities increased their output during the first quarter of this year by 0.8 per cent, offset by a 0.7 per cent fall in both manufacturing and the production industries generally.
The EEF said that its pay survey covered 305 settlements affecting 54,247 employees.
Of these, 170 were for increases of between 2.01 and three per cent and 71 for three per cent exactly.
Six per cent of them resulted in a pay freeze and four per cent were deferred.
"As anticipated, the level of manufacturing pay settlements has edged up very slightly this month," said David Yeandle deputy director of employment policy at the EEF.
" However, in general there continues to be no sign that wage inflationary pressures are building up in this sector of the economy."
Commenting on the downward revision in growth of the gross domestic product, Simon Rubinsohn, an economist at the stockbroker Gerrard, said it was widely expected.
It highlighted the threats to the economy and the increased possibility of a rate cut, he added. But Mr Rubinsohn doubts that the figures will panic the Bank of England's interest-setting monetary policy committee into slashing rates quickly.
"Rates are likely to remain on hold for the time being," he concluded.
Andrij Halushka at the Centre for Economics and Business Research said the numbers increased the impression that interest rates in the UK had reached their peak.
But the chief UK economist at Capital Economics, Jonathan Loynes, said the revised figure cast further doubt over Chancellor Gordon Brown's forecast that the economy would grow by three per cent again this year.
"We continue to expect growth of around two per cent this year, which means taxes are going up next year and interest rates are coming down later this year," he said.
John Butler at HSBC said the data showed the slowdown in the UK domestic economy had been more abrupt than the downturn in global demand.
"The mix of growth illustrates the vulnerability of the UK economy going forward," he said.
"If consumer spending slows, which part of the economy will pick up the growth baton?
"Overall, this is a disappointing number, but the key is whether this was an aberration or a new trend."
Philip Shaw at Investec said "We do not see the (Bank's committee) rushing out to cut rates.
"However, we still envisage an easing early next year, with the risk of a reduction this side of Christmas."