Britain’s economy is stuck in its bid to beat recession, with data showing retail sales growth slowed in July and manufacturing tumbling in June, presaging another cut to the central bank’s growth forecast.

Manufacturing output shrank by 2.9 per cent in June, sapped by extra public holidays to celebrate Queen Elizabeth‘s 60 years on the throne, though the drop was smaller than first estimated.

And retail sales growth slowed in July as record-breaking rain depressed sales of summer clothes and other seasonal products.

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The Office for National Statistics said the wider reading of industrial output, which includes energy production and mining, dropped 2.5 per cent in June, after a one per cent rise in May.

The quarterly fall in industrial output in the second quarter was revised to 0.9 per cent from the originally estimated 1.3 per cent drop, indicating that the decline in GDP was a notch smaller than reported two weeks ago.

But the 0.7 per cent contraction of the economy between April and June had been much sharper than expected, as a steep slump in construction compounded the weakness in other sectors.

The Organisation for Economic Cooperation and Development as well as a growing number of City economists are now predicting that the economy will shrink in the full year.

Britain fell back into a second recession around the turn of the year, and weakening business surveys show that a vigorous return to growth over the summer looks unlikely.

Consumers are still reluctant to spend more after rising prices and higher taxes have squeezed their budgets, and firms are holding back investment as the eurozone debt crisis is weighing on export prospects and confidence.

Wary consumers did not make for profligate shoppers last month, with the British Retail Consortium saying that like-for-like retail sales – at stores open for at least a year – rose by just 0.1 per cent compared with July 2011.

The value of total retail sales, a measure favoured by economists and closer to that found in official statistics, was two per cent up on the year, after a 3.5 per cent climb in June.