Retail sales rose unexpectedly in November, helped by online shoppers, according to official data, but record high government borrowing and shrinking mortgage lending underlined the scale of the country's economic downturn.
The pound, pummelled recently by a slew of bad news on the economy, bounced off the day's lows as investors questioned whether things were quite as gloomy as surveys have made out.
Figures from the Council of Mortgage Lenders showed home loans last month were 51 per cent lower than last November.
"Early Christmas shopping could explain part of the strength, but it doesn't really tally with the weakness in consumer confidence nor the data seen in the CBI and British Retail Consortium surveys," said James Knightley, an economist at ING.
The Office for National Statistics said sales volumes rose 0.3 per cent last month, leaving them up 1.5 per cent on the year. Analysts had forecast a monthly fall of 0.6 per cent.
Official retail sales figures have consistently surprised on the upside in recent months, flying in the face of anecdotal evidence that shoppers are reining in spending.
One reason for this discrepancy is that the official figures include internet shopping, a growing share of the market which many surveys fail to capture.
Data published by the statistics office showed the average weekly value for internet retail sales was more than £220 million last month, accounting for 3.8 per cent of total retail sales on the month.
In October, the percentage was 3.2.
Nevertheless, the strength of the official figures are still hard to square with other data showing the economy has entered a deep recession and house prices falling at a record pace.
Separate figures showed public sector net borrowing rose to £15.997 billion last month. That was well above forecasts and the highest monthly figure since records began in 1993.
The current budget deficit also posted a record high, signalling the public finances have deteriorated with alarming speed even before the government's latest fiscal stimulus measures have kicked in.
"The public finances look pretty awful," said Vicky Redwood at Capital Economics. "It's just worrying that they are that bad this early on in the recession."