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Last Updated: Thursday, 16 September, 2004, 10:01 GMT 11:01 UK
Surprise rise in UK retail sales
Shoppers in London
Despite recent interest rate rises shoppers keep on coming
UK retail sales defied forecasts and moved higher in August, putting more pressure on the Bank of England to raise interest rates again this year.

The Office for National Statistics (ONS) said retail sales rose 0.6% last month, up from July's 0.6% drop, and in defiance of forecasts for a 0.3% fall.

Shoppers snapped up clothing and footwear, which showed their biggest increase in sales in more than a year.

This was a result of retailers keeping their prices low, analysts said.

Retail sales were up by 6.5% compared with the same month last year.

Sales shine

The figures confounded recent surveys, including subdued UK inflation figures, which had pointed towards a slowdown on the High Street.

Recent reports of the death of the consumer may be premature
Howard Archer, Global Insight

Analysts expected the poor summer weather to have dampened shoppers' enthusiasm.

But sales of back-to-school items and the launch of new catalogues offset the traditional downward trends associated with the summer holiday season.

However, because August is the height of the holiday season, the month's retail sales figures are always more tricky to interpret.

'Staggering news'

After a run of softer retail and housing figures, some analysts had predicted that the Bank of England would not need to raise interest rates above their current level of 4.75%.

However, the retail sales figures have renewed talk of further increases.

"The relatively strong rebound in retail sales volumes in August, after July's drop, indicates that recent reports of the death of the consumer may be premature," said economist Howard Archer of Global Insight.

It "reinforces our belief that the Bank of England will still raise interest rates by 0.25% in November", he added.

Another economist, Philip Shaw from Investec, was less sure about the immediate outlook for rates, but was nevertheless, "very, very surprised " by the numbers.

"This was staggering news as nearly all the anecdotal evidence was pointing to another decline," Mr Shaw said.

"We still think rates will be on hold for the rest of the year, but we are somewhat less confident than before the data."

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