LONDON, Feb 3 - British retail sales rose at their fastest annual pace in nearly two years in January a survey showed on Tuesday, as the Bank of England appeared poised to raise interest rates this week for the second time in three months. The Confederation of British Industry's monthly distributive trades survey showed 53 percent of respondents reporting sales up on a year earlier against 15 percent who said they were down. That gave a balance of +38, up from +33 in December and the highest level since April 2002. The CBI said the latest balance number might have been exaggerated by the comparison with the poor sales performance a year earlier but sales growth was also very firm in the latest quarter, rising at its fastest pace since June 2002. Retailers remained optimistic about sales growth in February, with the expectations balance standing at +33 percent in this survey.
"Overall the retail sector looks to be healthy, but reports of price discounting suggest that competition remains intense and firms will be hoping that the Bank of England continues its gradualist approach to raising interest rates when it meets tomorrow," said Ian McCafferty, CBI chief economic adviser. The BoE's Monetary Policy Committee starts its two-day meeting on interest rates on Wednesday and is widely expected to raise borrowing costs by a quarter-point to 4.0 percent as evidence mounts the British economy is expanding rapidly. Recent data have shown the British economy grew by 0.9 percent in the fourth quarter of 2003 and even the long-suffering manufacturing sector has shown a sharp recovery. The CBI said apart from clothing retailers, most sectors reported strong growth in January. Booksellers and stationers reported their best performance in nearly six years while sales of furniture and carpets rose at their fastest in nearly four. There was also strong growth in sales of TVs, DVD players, fridges and washing machines, but the CBI said clothing stores reported a second month of falling sales. The survey was conducted between January 6 and 21.//