20 March 2008, 19:08 PM
  • Despite talks of the credit crunch and a downturn in spending, it seems consumers are still spending.

UK retail sales unexpectedly rose strongly in February, driven by higher food sales at the supermarkets, official figures have shown. In fact, sales grew one percent last month from January and by 5.5% from February 2007, said the Office for National Statistics.

The figures have surprised analysts, who had expected sales in February to decline 0.2% from January. The upbeat data may persuade the Bank of England to delay further reductions in interest rates.

The Bank of England kept rates on hold in March at 5.25%, following three cuts in recent months, as it aimed to ease fears over the impact of the continuing credit crunch and global financial market turbulence. “February’s surprising sharp jump in retail sales, if taken at face value, suggests that a consumer slowdown hasn’t even begun yet,” said Vicky Redwood, an economist at Capital Economics.

UK inflation as measured by the government’s preferred Consumer Prices Index is currently running at 2.5%, above the two percent target. “It’s hard to see what is keeping consumers spending. Yet these figures suggest that they certainly are,boosting the chances that the Bank of England’s Monetary Policy Committee will hold on to May before cutting interest rates again,” she adds.