Scorching weather tempts shoppers back to high street

The high street cashed in on soaring temperatures last month as consumers poured back into Britain's shops after being deterred by fears of war and recession, the retail industry said last night.

Sales of summer clothes and picnic food and drink helped to lift the annual growth of retail sales to 5.7 per cent from 4.1 per cent in May, the British Retail Consortium said. It singled out ice-cream, Pimm's, sun hats and sunglasses for special mention.

However, sales of goods linked to the faltering housing market, such as furniture, homewares, carpets and DIY goods, suffered a slowdown.

The increase was larger than expected and may cast some doubt over the wisdom of the Bank of England's decision last week to cut interest rates.

The figures were published after the main UK stock market index closed at its highest level for more than three weeks on the back of a surge in banks' and retailers' share prices. The FTSE 100 closed up almost 70 points at 4,127, its higher close since 20 June. The high street giants Next, Marks & Spencer and Burberry saw their share prices surge by as much as 4.3 per cent.

The BRC said it was too early to "get too excited" about a new imminent high street boom. "Consumer confidence is still fragile and is only starting to improve," said Bill Moyes, its director general. "The warm weather boost has its limitations and consumers remain nervous about their long-term financial outlook."

There was gloomier news from the factory floor, where official figures showed that manufacturers were unable to force through any price rises on their customers last month. The lack of any pricing power within the beleaguered industrial sector raised fears of further job cuts, but boosted hopes of fresh cuts in interest rates.

The price of goods leaving factories was stable in June after falls in April and May, the Office for National Statistics said.

Companies have raised prices by just 1.1 per cent over the last year, much less than the 1.9 per cent rise in the cost of their raw materials, implying that manufacturers' profits are still under pressure. There was also little sign of the pass-through from the fall in sterling's exchange rate into higher imported materials costs.

John Butler, UK economist at HSBC, said: "The manufacturing sector continues to provide the strongest case for cutting rates or, more importantly, attempting to manage sterling down."