Surge in retail sales points to rate rise
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Your support makes all the difference.Retail sales surged at their fastest annual pace in more than two years last month, while manufacturing growth also increased at a faster rate, according to separate surveys yesterday that analysts said raised the likelihood of an interest rates rise next week.
Retail sales surged at their fastest annual pace in more than two years last month, while manufacturing growth also increased at a faster rate, according to separate surveys yesterday that analysts said raised the likelihood of an interest rates rise next week.
The CBI distributive trades survey for May found 65 per cent of businesses reporting that sales were rising compared with a year ago, while 14 per cent said sales were falling. The balance of +51 was the strongest reading since April 2002, higher than the +30 recorded a month ago.
The Chartered Institute of Purchasing and Supply's purchasing managers' index, meanwhile, rose for a third month to 55.6, its highest level since January and well above the 50 mark that signals a contraction.
The survey, which also showed the largest monthly gains in manufacturing employment since 1997, is the latest report to challenge official data showing weakness in the manufacturing sector. At face value, the UK report's evidence of robust growth, a tightening labour market and building inflation pressures is likely to increase the odds the Bank of England will raise interest rates next week for a fourth time since November.
Howard Archer, an economist at Global Insight, said: "Sharply rising input prices are obviously a source of some concern, but manufacturers seem increasingly able to pass on some of their costs, which will be of concern to the Bank of England."
The BoE has signalled that it expects the official data, which currently shows two consecutive quarters of contraction - a mild manufacturing recession - to catch up with the other business surveys. After a long period of being unable to make up for rising input costs - chiefly commodities such as steel and crude oil - manufacturers appear now to be recouping at least some of them.
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