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Retail Spending Shows Record Rise

In a move which is totally at odds with the state of the UK economy and financial pressures which every member of the UK population is feeling, retails sales for May showed a rise of some 3.5%, the largest rise since the introduction of the measurement back in January 1986. While nobody quite understands how or why retail sales were so strong in May, it does increase the likelihood of a short term interest rate rise.

The figure also puts the Bank of England and the government under yet more pressure to combat the growing threat of inflation. There had been hopes that retail spending would begin to fall and the oil price would soften a little, but both of these scenarios seem some way off at the moment. Mervyn King, the governor of the Bank of England, highlighted the growing threat to the UK economy in his Mansion House speech yesterday evening, describing the situation as one of the most challenging he has seen for some time.

As the economic story of the UK continues to roll on this particular cycle is becoming ever more difficult to read and understand. Money is tight, but retail sales are flying, interest rates have fallen, but mortgage costs are rising. What next?

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