High street boom renews rate fears

High street sales are growing faster than at any time since the economic boom of the late 1980s, official figures showed yesterday. An unexpectedly large jump in retail sales growth stoked fears that interest rates might have to rise again, but economists cautioned that the figures were nothing like as alarming as they appeared at first sight.

According to the Office of National Statistics, retail sales growth hit 6.5 per cent last month, up from 5.6 per cent in June and higher than expectations in the City of around 5.9 per cent.

The surge in spending was driven by building society windfalls, which sent sales of household goods to a record high, but there was evidence that the conversion boom peaked in June and was falling away quite rapidly.

Sales of household goods, which include big ticket items such as domestic and electrical appliances, rose 7.4 per cent in the three months to July, compared to the previous quarter, the highest growth since 1986. On an annualised basis, sales were 15.8 per cent higher, indicating the extent to which windfalls have found their way onto the high street.

But Geoffrey Robinson, the Paymaster General, played down fears that inflationary pressures were building in the economy. He said strong retail sales were no surprise and competition on the high street was keeping prices down.

He added: "It was entirely expected. We know there is a lot of windfall money being paid out...so we budgeted for this and the market was also expecting it."

People were also saving some of their windfalls, Mr Robinson continued. "At present, people are having a good time, they're enjoying themselves, they're also saving a lot of it so the situation is that for the moment it's as we expected it and we will review it as the situation develops."

He was speaking after figures from the Building Societies Association showed savers had deposited a record amount of cash into societies.

The association said the influx of pounds 1.858bn was due to carpetbaggers seeking a conversion windfall, combined with investors looking for a good interest rate.

The sales figures came a day after an economist warned that the economy was in danger of repeating the boom-bust cycle of the late 1980s as a European Commission survey showed consumer confidence was back at the record levels of 1987.

Ben Sanderson, of Nottingham Trent University, said: "Consumers are showing uncanny parallels with their behaviour during the Lawson boom."

City economists were divided on whether the figures meant interest rate rises were more likely. David Bloom, at HSBC James Capel, said: "It is impossible to believe the Bank will be comfortable with annual retail sales running at 6.5 per cent, the highest level since July 1988 and the highest in the world at present."

He said this month's lower-than-expected 0.3 per cent rise was not a sign of a slowdown but an indication that the economy was tailing off before enjoying another surge. "If this month's rise is such a soft patch, one quakes in anticipation when sales actually restart their powerful monthly trend."

Simon Briscoe, of Nikko Europe, said this backed up last week's Bank of England warning that there was an "upside risk that larger-than-expected proportion of the payouts will be spent during the year".

Andrew Cates, of UBS, was more sanguine: "The fact that windfall spending seems to have moderated may provide some comfort to the members of the Bank's monetary committee."

But he said the growth in the money supply - which yesterday came in at 11.8 per cent, above City forecasts - was "worryingly high".

Suggested Topics
Voices
Stephanie first after her public appearance as a woman at Rad Fest 2014
voices

Arts and Entertainment
Banksy's 'The Girl with the Pierced Eardrum' in Bristol
art'Girl with the Pierced Eardrum' followed hoax reports artist had been arrested and unveiled
Voices
Oscar Pistorius is led out of court in Pretoria. Pistorius received a five-year prison sentence for culpable homicide by judge Thokozile Masipais for the killing of his girlfriend Reeva Steenkamp
voicesThokozile Masipa simply had no choice but to jail the athlete
Life and Style
tech

Board creates magnetic field to achieve lift

PROMOTED VIDEO
News
Russell Brand at an anti-austerity march in June
peopleActor and comedian says 'there's no point doing it if you're not'
Arts and Entertainment
Sister Cristina Scuccia sings 'Like a Virgin' in Venice
music

Like Madonna, Sister Cristina Scuccia's video is also set in Venice

News
i100
Arts and Entertainment
James Blunt's debut album Back to Bedlam shot him to fame in 2004
music

Singer says the track was 'force-fed down people's throats'

Life and Style
The Tinder app has around 10 million users worldwide

techThe original free dating app will remain the same, developers say

News
news

Endangered species spotted in a creek in the Qinling mountains

News
ebooksAn unforgettable anthology of contemporary reportage
News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
News
peopleJust weeks after he created dress for Alamuddin-Clooney wedding
Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Life and Style
health

Some experiencing postnatal depression don't realise there is a problem. What can be done?

Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album