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Thursday, 23 May, 2002, 09:05 GMT 10:05 UK
Boom time returns for UK retailers
French Connection shop
Clothes sales rose strongly
Shoppers in the UK have got over the post-Christmas hangover and are back to their big-spending habits, new figures have shown.

According to the Office for National Statistics (ONS), retail sales volumes in the UK last month rose at their fastest rate for more than two years.

The last time things moved this fast on the High Street was January 2000, when consumers celebrated the millennium with a credit-fuelled spending spree.

The figure could intensify pressure on the Bank of England to raise interest rates, at a time when the members of its board are split on what to do next to keep inflation bottled up.

Boom or bust?

Some reassurance could be found in the implied sales deflator - the measure of price rises or falls.

A 0.3% decline in the year to April, after a 0.2% rise in the year to March, could mean shops are still having to keep a lid on their prices.

But the boom in house prices - rising as much as 2% a month in London - makes some observers fear that consumers are taking on new debt to outfit new homes at far too fast a rate.

"There's a huge new bubble here, far more dangerous than the tech stock bubble because it affects far more people," said one trader.

"Some people inside the Bank of England are muttering about a normative interest rate of about 5.5%, not the 4% we've got at the moment."

Consumers are carrying heavier debts than at any time since the last house price bubble popped in the early 1990s, and different mortgage choices also makes them even more vulnerable to shifts in interest rates.

Forcing the pace

The data from the ONS showed the volume of retail sales overall rose 1.7% in April.

The gain was much faster than the 0.4% the economists had expected, not to mention the modest 0.1% rise the previous month had seen.

The annual rise from April 2001 to April 2002 was 6.9%, way above March's 5.8%.

Non-food stores were responsible for the splurge, with sales up 9.5% on last April and 2.4% on last month.

Within that it was clothes and shoes which forced the pace, up 4.7% on March and 17.1% on the year and marking a record increase since the statistics' inauguration in 1986.

Food sales, on the other hand, dropped 0.1% last month, for a 2.4% annual climb.

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See also:

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