British retail sales soar in May

Consumers have shrugged off the current economic climate and rushed out to the shops after a record level of retail spending was recorded last month.

Figures from the Office for National Statistics showed that British retail sales soared in May, increasing at the fastest pace of growth since the series began in 1986. The news has stunned economists and has heightened fears that UK interest rates will rise from their current level of 5%.

However, it is widely believed that the Bank of England will increase interest rates in a bid to manage runaway inflation after it rose to 3.3% in May.

Record sales of food and clothing pushed retail sales up by 3.5% in May - the fastest rate in over twenty years, possibly boosted by the recent warm weather.

Analysts had expected the figures to show a 0.1% decline.

Howard Archer, chief UK and European economist at Global Insight, was astounded by the figures while Philip Shaw, chief economist at Investec, said he was staggered.

Geoff Dicks, economist at RBS, said consumers were still willing to pay full prices for goods, as prices increased by 0.6% during in May.

He added that the odds of a rate hike in the next couple of months just got a lot shorter.

Last night Mervyn King, the Governor of the Bank of England, hinted that the bank’s Monetary Policy Committee will take the necessary steps in order to control inflation, which is set to rise to over 4% before the end of 2008, which exceeds the bank‘s target of 2%.

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