British sales surge, central bank closer to interest rate hike
By Roland Jackson, AFP
May 23, 2014, 12:05 am TWN
LONDON--Britain's retail sales soared in April, official data showed Wednesday, as the Bank of England appeared a step closer to raising its record-low interest rate.
Retail sales, a key indicator of household spending confidence, surged 6.9 percent compared with April 2013, the Office for National Statistics (ONS) said in a statement.
April's year-on-year retail sales growth was the fastest for a decade and signaled that Britain's economic recovery has picked up more speed in the second quarter.
In reaction, the pound soared to a 16-month high against the European single currency, and it also briefly spiked above US$1.69.
Separately on Wednesday, minutes from the Bank of England's latest meeting hinted at policymakers edging towards hiking its key lending rate from 0.50 percent, where it has stood for more than five years to aid Britain's economic recovery.
The country's growth powered ahead in the first quarter with gross domestic product of 0.8 percent, but there are rising concerns about its recovering housing market amid fears of a potential bubble in London.
Rate Hike Closer
Analysts said Wednesday's data would put pressure on the Bank of England to consider raising its main interest rate, which plays a role in the level of borrowing costs that retail banks demand in return for home loans.
“With the growth story broadening out we are getting closer to a rate rise from the Bank of England,” said ING Bank economist James Knightley.
“The first hike will probably come in February, but given the strength in growth ... the risks are skewed towards a slightly earlier move.”
HSBC on Wednesday upgraded its second-quarter economic growth forecast to 0.9 percent from 0.7 percent.
“We think today's retail sales combine with high consumer confidence to support this revision,” said HSBC economist Elizabeth Markins.
The BoE's decision to keep its rate on hold at its May meeting was “becoming more balanced” for some members of the nine-strong monetary policy committee, the minutes said.
Analysts read this to mean that there was an increase in support towards tightening borrowing costs.
But with British inflation holding below the BoE's 2.0-percent target level, policymakers were keen to leave the interest rate on hold, for now at least.
The nation's 12-month inflation rate accelerated in April for the first time for 10 months, lifted by the later timing of Easter, data showed Tuesday.
The Consumer Prices Index (CPI) inflation measure ticked up to 1.8 percent, after striking a four-year low of 1.6 percent in March.