The buoyant figures made a further cut in base rates unlikely after Mr Clarke's meeting next Tuesday with Eddie George, Governor of the Bank of England. That, along with another weak start on Wall Street, unsettled the stock market, and the FT-SE 100 index closed 39.6 points lower at 3,668.8.
The volume of sales jumped 1.3 per cent in June, driven by a huge increase in clothing and footwear. In the latest three months, a better indicator of the underlying trend, the increase was also 1.3 per cent, the biggest since March 1994.
Food sales barely expanded, but the three-month increase in non-food sales volumes was 2.4 per cent. This was the highest since September 1988, the height of the biggest consumer boom in recent history.
The figures were welcomed by the Government, which is counting on an improving economy to boost its chances at the ballot box. Treasury minister Angela Knight said: "They confirm that high street sales are on a firm upward trend, reflecting a growing mood of optimism among consumers."
The size of the June rebound in sales took City analysts by surprise, despite earlier anecdotal evidence of surging sales. This evidence suggests the strength has continued into July.
For example, department store and supermarket group John Lewis reported that the value of non-food sales in the week to 13 July was 17.7 per cent up on a year earlier.
The strong sales volumes in recent months have been enjoyed by most kinds of retailers except food stores and the struggling mail order industry. In the three months to June these two sectors were 0.4 per cent up and 1.3 per cent down respectively on the previous three months.
Sales by the remaining categories - department stores, clothing and footwear retailers, houshold goods stores and others - grew by 2-3 per cent, or around 10 per cent at an annualised rate.
Some retailers reported a Euro 96 effect in June, according to the Office for National Statistics. The contest boosted off-licences and sales of sporting goods.
The average weekly value of total high street sales in June was pounds 3.1bn, which was 7.4 per cent higher than a year earlier and the highest growth in value terms since March 1991.
Economists were divided about whether the buoyant high street figures ruled out another cut in base rates. David Walton at investment bank Goldman Sachs said: "It certainly will for the Governor, but the Chancellor can still point to extremely subdued inflationary pressures."
The Treasury yesterday said there were virtually no inflationary pressures, and the economy as a whole was not in danger of overheating.
Alex Garrard at UBS said Eddie George would be in a hawkish mood when he and Mr Clarke hold their monetary meeting next Tuesday. He predicted the Chancellor would not risk being criticised in the Bank of England's next Inflation Report, due on 7 August.
"There is a risk of overheating but its effects on inflation will not be felt for two or three years," Mr Garrard said.
Ciarn Barr at Deutsche Morgan Grenfell said: "When combined with evidence of an improving manufacturing sector, the Chancellor's credibility would be severely tested were he to cut rates again."Reuse content