22 July 2004, 15:46  Euro 2004 kicks UK retail sales growth up sharply

British retail sales surged in June at their strongest pace in six months and at almost three times the rate expected as the Euro 2004 soccer tournament boosted TV and sportswear purchases, data showed on Thursday. Analysts said an August interest rate hike was now a done deal. Short sterling interest rate futures plunged and the pound rose nearly half a cent against the dollar on the view that the Bank of England may have to be more aggressive in future months. The Office for National Statistics said June sales jumped 1.1 percent on the month in June compared with 0.7 percent in May and the 0.4 percent gain expected by economists. That brought the year-on-year rate to 7.2 percent. "If there were any doubts at the BoE about a rate hike next month, this dispels them," said David Page, economist at Investec.
The BoE has already raised borrowing costs four times since last November to 4.5 percent to cool rampant consumer spending. Retail sales have not shown a monthly decline for 13 straight months, the longest period of expansion since comparable records began in 1986.
In the three months to June sales rose 1.9 percent and were up 6.9 percent compared with a year ago, the highest in two years, suggesting consumption will have driven overall economic growth higher in the second quarter. Economists were already expecting growth to accelerate to 0.9 percent in the second quarter but the latest sales data have increased the risk that the number will come in higher. GDP grew 0.7 percent in the first three months of the year. "Consumption will be strong in the second quarter and this underpins our forecast of 1 percent GDP expansion," Page said. The ONS said the Euro 2004 soccer tournament pushed up household goods sales as consumers snapped up new TV sets. Sport shops also reported higher sales of football shirts and related attire, although clothing stores saw sales decline in June. Poor weather in June may have been behind the drop in clothing sales, which also affected some hardware and furniture stores, the ONS said///

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