UK retail sale figures rose unexpectedly for August, after official data revealed consumer spending had grown in spite of inflation.
The Office of National Statistics (ONS) figures give rise to speculation that the Bank of England will move to raise interest rates, in light of inflation levels and the strength of the economy.
Last Wednesday, the central bank’s Governor, Mark Carney suggested that interest rates may be raised incrementally in the future.
Speaking at the International Monetary Fund in Washington, he commented:
“If the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure…some withdrawal of monetary stimulus is likely to be appropriate over the coming months…”
Recorded growth in August for UK retail marks the fastest since April, above analysts expectations of 0.2 percent for the period.
Higher inflation levels across the year had pushed down sales figures during the first half of the year, as consumers looked towards saving rather than spending.
According to the ONS, the measure of inflation used in retail sales data rose to an annual rate of 3.2 percent in August, up from 2.7 percent.
“Today’s retail sales figures indicate that consumers are showing an impressive resilience in the face of the ongoing real pay squeeze,” commented Ruth Gregory of Capital Economics.
“A modest pick-up in household spending should help the economy to re-accelerate a little ahead and adds weight to our view that the [Bank of England] will hike interest rates in November.”
This follows an update from French Connection on Tuesday, which revealed it had narrowed losses despite a persistently difficult retail climate in recent years.
The pound rose 0.61 per cent following the data on Wednesday to $1.3593.
The next meeting of the Monetary Policy Committee is set to take place on November 2nd, 2017, where a decision will be made on interest rates.