British consumers started the new year shopping in earnest and volumes were maintained into February, new official data showed on Thursday. The Office for National Statistics said that retail sales now surged by 1.2 percent in January, twice the gain it had estimated last month, and volumes were unchanged in February. That took the three-month growth rate to 1.9 percent, its fastest since June 2002, and the annual rate to 6.5 percent. Interest rate futures and gilts quickly fell as dealers bet that strong consumer spending will encourage the Bank of England to raise interest rates again next month.
"To see that rate of growth in January and see no retracement at all in February will probably weigh on the Monetary Policy Committee," said Richard Batley, economist at Halifax. "It does make an April move more likely" Strong consumer spending is also helping the public finances, for which the ONS also released February figures. The public sector net cash position showed an unexpected surplus of 23 million pounds versus expectations of a requirement of 900 million pounds. This was partly due to a 7.6 percent annual increase in VAT receipts and also a 12.1 percent surge in income tax receipts. But while this is good news for Chancellor of the Exchequer Gordon Brown who delivered his annual budget on Wednesday, he may still be disappointed that corporation tax receipts are still showing no bounce. They fell 25 percent on a year earlier. The government's preferred accruals measure of net borrowing also showed a surplus, of 1.06 billion pounds, taking the financial year-to-date position to 30.9 billion pounds. With one month to go, Brown's full-year forecast is net borrowing of 37.5 billion pounds.///