Retail sales show strong rise but pay deals are subdued

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The Independent Online

High street spending grew strongly last month fuelling speculation that interest rates may still have further to rise. But separate figures on pay settlements suggested there was little to worry about in the way of wage inflation.

High street spending grew strongly last month fuelling speculation that interest rates may still have further to rise. But separate figures on pay settlements suggested there was little to worry about in the way of wage inflation.

City economists had expected the petrol blockade to keep shoppers away from the stores in September. But government figures released yesterday show that retail sales rose by 0.6 per cent last month and by 4.6 per cent on the year.

A spokesman for National Statistics said: "There was no overall effect from the fuel crisis. Some stores said sales had dropped but others said they had risen."

The annual rise in retail sales in September was the highest since May. Economists said this would put further pressure on the Bank of England's Monetary Policy Committee to raise interest rates. The MPC voted unanimously earlier this month to keep interest rates on hold at 6 per cent, to the surprise of economists.

Richard Iley at ABN Amro, said: "The economy is still clearly growing above trend. I don't know where the mythical slowdown in consumer demand is in the data. I think rates still need to rise."

Separately, figures from the Confederation of British Industry's pay databank showed that while manufacturing settlements had edged upwards, awards in the service sector had dipped. In the three months to August, pay settlements in manufacturing rose by 3.3 per cent, compared with 2.8 per cent in the previous quarter. However, settlements in the service sector averaged 3.5 per cent compared with 3.9 per cent in the previous quarter.

Other figures showed a healthy surplus in the Government's finances in September. The public sector cash surplus in September was £8.6bn. The figure was swollen by the £10bn of receipts from the auction of third generation mobile phone licences.

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