Football shirts and TV sets boosting economy, Brown says

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Gordon Brown has forecast an acceleration in economic growth this year as official figures showed retailers enjoyed a World Cup-driven surge in sales of football shirts and flat-screen televisions.

"Growth is strengthening," the Chancellor told MPs. "Growth in the second half will be stronger than in the first half."

The economy grew 0.6 per cent in the first quarter, in line with the economy's long-running trend, and is expected by economists to exceed that in the second quarter that ends this month.

The Treasury is forecasting growth of 2 to 2.5 per cent this year and about 3 per cent in 2006 and 2007.

Philip Shaw, the chief UK economist at Investec, said quarterly growth of 0.8 per cent would deliver growth above his forecast range.

"In that case growth of 3 per cent would look more realistic although with a US slowdown I am not sure that is achievable," Mr Shaw said.

The Treasury received a boost from official figures yesterday showing the high street enjoyed its strongest growth in retail sales so far this year in May.

The volume of goods passing across shop tills rose 0.5 per cent last month, taking the annual growth rate to 4 per cent, the strongest rise since December's shopping spree.

The Office for National Statistics said department stores had enjoyed their best three months of trading since February 2001, while clothes stories posted their strongest quarter since May 2004.

It said electrical retailers had cited the World Cup for "good sales" of televisions. Sales of electrical household goods posted annual growth of 19 per cent in May after 23 per cent in the previous month.

Last week, John Lewis reported a 42 per cent annual rise in electrical goods sales from its stores in the week to 27 May as flat-panel television sales reached a new high.

"The good numbers are in part related to the build-up to the World Cup," Alan Clarke, the UK economist at BNP Paribas, said. He warned sales growth could stagnate this month if England fail to progress through the tournament.

Malcolm Barr at JP Morgan agreed but said even a flat reading in June would leave annual growth for the second quarter at a "boomy" 6.5 per cent.

"The current profile of retail sales data will do little to deter the Monetary Policy Committee from considering higher rates," he said.

Mervyn King, the Bank's governor, said last month the MPC was very aware of the potential distortions to consumer spending caused by the World Cup.

A separate report from the Royal Institution of Chartered Surveyors showed the strongest house price rises in two years in the three months to May.