A controversy emerged yesterday over the true state of high street sales as the City joined retailers to attack official figures that indicated a shopping bonanza since the new year.

Economists sounded warnings that the Bank of England would be left puzzled and crucial decisions over interest rates hampered by the official data, which showed a buoyant 2 per cent jump in the volume of goods sold in the first quarter.

This marked the strongest sales growth for four years.

The steep jump in first-quarter sales, up 5.6 per cent from a year earlier, was sharply at odds with almost every other barometer of retail activity, and retailers’ own reports that trading is blighted by the credit squeeze and house price slump.

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The sharp increase in sales during the January to March period came despite the official data registering a modest 0.4 per cent drop in March alone.

Sales of nonfood items dropped by 0.7 per cent in March, but already strong estimates for January and February were revised to still higher levels.

City economists lined up with the British Retail Consortium, and senior retailers to question the figures from the Office for National Statistics.

The ONS itself insisted that “underlying growth in retail sales remains robust”.

Economists highlighted a series of other gauges of consumer demand, all of which painted a much bleaker picture.

They included the Bank of England’s own surveys by its regional agents, which detected weakening consumer spending.

Other indications of sharply deteriorating consumer conditions included plunging consumer confidence, households’ willingness to make big purchases at a 13-year low, and grim monthly snapshots of the high street by the BRC and CBI.

Stephen Lewis, of Insinger de Beaufort, said it was clear that the Bank’s monetary policy committee (MPC) did not believe the earlier official figures, with minutes of its debate this month noting the contrast between these and other indicators.

However, Mr Lewis said that the MPC would now be left in a quandary over what data to believe.

Analysts pointed to the true scale of the boost to sales volumes from aggressive discounting, as well as complicated adjustments to strip out from the data seasonal trends in trading around Easter, as hard-to-measure factors that may have distorted the figures.

The official estimates confirmed other evidence that retailers have resorted to aggressive discounting to entice consumers.

Goods prices were down by 1.2 per cent in March from levels a year before – double the year-on-year fall reported for February, the ONS estimated.

However, price trends were still stronger in the first quarter than in the final quarter of last year.

Economists said that the official numbers may have been unduly flattered by the difficult process of seasonal adjustment, which is notoriously difficult around Easter.

The ONS figures were also met with disbelief by top retailers, who maintain trading conditions are grim. Sir Philip Green, owner of Arcadia retail group, said: “Do they start off by saying ‘Once upon a time . . .’?”

Chris Ronnie, chief executive of JJB Sports, added: “The environment is the most challenging I’ve ever known.”

At the launch of its autumn range on Wednesday, New Look said the clothing market had been far worse than expected over the past two months.

Joscelyne Hynard, a British Retail Consortium senior analyst, called for the ONS to clarify how it collated the figures as the trade body attacked them for “disguising” the true state of the high street, where nearly a dozen chains have fallen into administration since the start of the year.

She toldThe Times: “When I look at their numbers, I don’t really believe them. The retailers are telling us it’s dire out there, especially the nonfood ones. Clarification would be helpful. Our figures are based on actual data from our participants, we don’t revise, we don’t seasonally adjust, it’s a straightforward calculation.”

However, not all retail executives agreed. One argued: “The high street’s proving more resilient than people thought.”

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