Consumers started the new year with a bang, embarking on a renewed spending and borrowing spree that could force the Bank of England to raise interest rates again soon, new figures showed yesterday.
Shoppers embarked on their most extravagant Christmas spending spree since the boom days of the 1980s. Retail sales in November, December and January rose 1.7 per cent on the previous quarter, the strongest festive shopping session since 1987, figures from the Office for National Statistics showed.
January saw a 0.6 per cent monthly jump in sales, taking the annual rate to a 13-month high and contradicting anecdotal evidence of a tough Christmas.
The message was echoed by the latest public finance figures that showed VAT receipts 11 per cent higher than in January 2003. Meanwhile, banks reported the largest rise in mortgage lending since November 2001, confirming homebuyers had shrugged off speculation of rising rates. "This puts paid to any view that consumer spending or confidence is softening," John Butler, the UK economist at HSBC, said. "It suggests the Bank may need to be more aggressive than its current 'gradual, gradual' approach to raising rates if it wants the consumer to listen."
The growth in retail sales was much stronger than forecast in the City, where economists had expected growth to slow by more than a half to 0.3 per cent from December's 0.8 per cent.
The ONS figures showed shops managed to increase sales without sacrificing their profit margins. While sales volumes rose at an annual 6.4 per cent rate, growth in total value was not far behind at 5.6 per cent.
The picture for mortgage lending was more mixed, with the British Bankers' Association reporting a surge but the Council of Mortgage Lenders seeing a slowdown. The BBA said its members lent £5.9bn last month, up from December's £5.5bn and the highest since November 2001. The CML said lending for house purchase slowed to £12.2bn from £10bn. David Dooks, at the BBA, said: "It is too soon to see any impact of the latest rise in rates."Reuse content