Spending boom provokes fears of sharp rise in interest rates

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The Independent Online

Shoppers went on a spending spree not witnessed since the boom days of the 1980s last month, raising fears of an unsustainable consumer boom and fuelling speculation about an imminent rise in interest rates.

Shoppers went on a spending spree not witnessed since the boom days of the 1980s last month, raising fears of an unsustainable consumer boom and fuelling speculation about an imminent rise in interest rates.

Armed with record amounts of credit and encouraged by a fresh round of price cuts, consumers ransacked high street stores and department stores for bargains.

Away from the supermarkets, high street sales in April rose at the fastest rate since May 1998 as the annual growth rate in non-food sales hit 9.5 per cent.

The main beneficiaries were clothes stores, where sales rose 17 per cent, and mail-order companies, which saw orders jump by more than 15 per cent.

Total sales, including food, rose by 1.7 per cent in April, the strongest monthly performance since the Millennium-inspired spending spree two years ago.

The figures, which took the City by surprise, follow in the wake of figures showing that house prices are rising at rates not seen since the 1980s as homebuyers chase a dwindling stock of properties. They also came as a blow to the Bank of England, which has insisted that consumers would stop spending and borrowing of their own accord.

Last night some economists said interest rates would have to be raised to 6 per cent from the current 38-year low of 4 per cent. "If evidence was ever needed that rates should rise, this is it," said John Butler at HSBC.

Earlier this week one property expert warned that raising rates to 6 per cent could trigger a London house price crash.

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