The latest figures deepened the dilemma facing the Bank of England's Monetary Policy Committee next week, when a new member, Sushil Wadhwani, will vote for the first time.
Stronger consumer demand weighs against any further cut in interest rates. But exporters are hoping for a reduction to bring them some relief from the strength of the pound.
The outlook for retail sales this month is the brightest since last summer, and the trend in sales growth edged higher in May, according to a monthly survey from the Confederation of British Industry. It showed a slightly smaller increase in sales volumes in May, with a balance of 11 per cent of retailers reporting higher rather than lower sales. But the three- month average improved to 13 per cent, the best since last July.
Separate figures from the Bank of England also revealed increased household borrowing. New consumer credit surged to pounds 1.4bn in April, up from pounds 1.25bn in March and the highest since December 1997. Within the total, credit card lending set a new record of pounds 540m.
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