Retail sales 'could lead to further rate rise'

Consumer spending rose by three per cent year-on-year last month, increasing the likelihood that interest rates could rise again in the near future.

Many analysts have already suggested that further rate rises were likely before the end of the year, despite last Thursday's increase being the fifth such rise in eleven months.

Figures from the British Retail Consortium (BRC) also found that total sales increased by 5.1 per cent over the course of the year.

However, the June rise may have been distorted by the combination of wet weather and the 2006 World Cup, analysts suggested.

"The Bank of England is keen to see consumer spending moderate because it feels there needs to be below-trend growth to get away from inflationary pressures," added Howard Archer of Global Insight, according to the Daily Telegraph.

"But if consumer spending does hold up it definitely increases chances that the Bank will raise rates to six per cent," he added.


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