The strong sales figures took analysts by surprise
A record level of retail spending in May has provided a respite from gloomy economic predictions, but it has also fanned fears of higher interest rates.
Sales rose by 3.5% during May, the strongest monthly growth since January 1986, statistical office figures show.
Shocked analysts said the figures ran contrary to signs of a slowing economy and weak consumer confidence.
Earlier, the Bank of England warned it would act to rein in inflation and said the UK was heading for difficult times.
The Bank of England's governor, Mervyn King, said the UK was facing its "most difficult economic challenge for two decades".
Mervyn King talks about how some households will find life harder
Speaking at the Mansion House in London on Wednesday night, Mr King made it clear that inflation was set to rise, while growth and house prices were likely to fall.
Mr King also warned that real take-home pay would stagnate, making life difficult for some families.
Analysts and companies have been echoing these negative sentiments in recent weeks, with mortgage providers such as HBOS forecasting a 9% drop in house prices, which is why the retail sales figures came as such a shock.
"I'm staggered," said Philip Shaw, chief economist at Investec.
Unfortunately this 'shop till we drop' attitude will sow the seeds of its own demise. The risk of rate rises followed by a recession has just gone up
"The figures are on a completely different plane compared to what markets were expecting."
Some questions were raised over the accuracy of the figures because they were so out of kilter when compared with other reports.
Even the Bank of England has questioned the statistical office reports, and after last month's retail sales figures release said that it was giving more weight to other indicators of High Street activity, which were showing more of a slowdown.
"The retail sales numbers do look somewhat stronger than really a raft of surveys," Bank of England chief economist Charlie Bean told the BBC's economics editor Stephanie Flanders.
Mr Bean added that given the uniformity of the picture from all of this other evidence the Bank of England "has put some weight on that other evidence relative to the official retail sales data".
Even so, May's retail figures make for surprising reading. Food sales rose 3.3% as people bought salads and stocked up for barbecues, while clothing sales jumped 9.2% as shoppers sought out new summer outfits.
The better-than-expected figures took the annual sales increase to 8.1%, the fastest rate since April 2002.
Comparing the period between March and May with the previous three months - which is seen as a better measure of underlying growth - sales rose by 1.8%. This was against growth of 1.5% in the February to April period.
Inflation, it seems, has become policymakers' biggest worry and not the state of the UK economy.
"Today's very strong set of retail sales numbers suggests that, despite all the doom and gloom, the UK consumer continues to shop," said Ian Kernohan, economist at Royal London Asset Management.
"Unfortunately this 'shop till we drop' attitude will sow the seeds of its own demise. The risk of rate rises followed by a recession has just gone up."
The fear is that even if the surge in consumer spending can be attributed to a spell of warm weather in May, high food and fuel prices will force the Bank of England to raise interest rates at a time when the UK economy is already slowing.
On Wednesday, the BBC was told by senior industry sources that household energy bills could increase by as much as 40% this winter.
That could mean households paying £400 more a year on average for their gas and electricity. An increase on that scale would be far more than analysts have predicted in recent months.
If wage claims get out of hand then the MPC will have no hesitation in pushing interest rates up
Howard Wheeldon, BGC Partners
The effect of higher fuel prices can already be seen on the rate of inflation.
The latest inflation figures showed that the rate of consumer price growth had accelerated to 3.3% in May, well above the government's target of 2%.
At its last rate-setting meeting, the Bank of England's Monetary Policy Committee (MPC) voted eight-to-one to keep borrowing costs on hold at 5%.
In his speech on Wednesday night, Mr King said the MPC was "prepared to take whatever action is needed" to bring inflation back down to the government's 2% target.
"The message from the Bank of England governor is now very clear," said Howard Wheeldon of BGC Partners.
"Learn to live with inflation, learn to accept that purchasing power will shrink and get real to a view that if wage claims get out of hand, then the MPC will have no hesitation in pushing interest rates up."
However, Mr King added that monetary policy alone could not prevent the current effects of rising food and energy prices on living standards.
Neither have interest rate cuts coaxed banks, which are currently re-evaluating risk and keeping a tight grasp on their balance sheet, to be more generous in their lending to house buyers.
Chancellor of the Exchequer Alistair Darling has also warned about the perils of inflation. In his first Mansion House speech, he emphasised the need to tackle price growth.
Mr Darling reiterated his call for pay restraint in both the private and public sectors, warning against a return to the spiralling rates of inflation last seen in the 1970s.
He also laid out plans to give the Bank of England new responsibilities for ensuring the UK's financial stability.
Part of the reforms will include setting up a new Financial Stability Committee, which will guide the Bank's operations in this field.
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