Shopping Surge in August Boosts British Rate Hike Bets

When fuel sales are included, sales rose 2.4% year-on-year, comfortably beating the 1.1% increase analysts had forecast and sharply higher than the upwardly revised 1.4% increase from the previous month. Over a three-month span ending in August, the ONS said, the growth rate is 1.2%, that's up from the 0.7% pace recorded over the three months ending in July. Data released last week, showed wages increased less than expected as they continue to lag behind inflation.

The U.K. pound spiked higher against the dollar Wednesday after the country's official statistics office said August retail sales much faster than anticipated, possibly cementing the case for a rate increase from the Bank of England as early as November.

Prices in British shops continued to rise in August, the ONS said, reflecting the wider increase in overall inflation over the a year ago as the depreciation of the value of the pound seen since the vote.

"Today's retail sales figures indicate that consumers are showing an impressive resilience in the face of the ongoing real pay squeeze", said Ruth Gregory of Capital Economics. Sales at department stores rose by 1.1% and non-store sales jumped 5% as consumers felt confident enough to spend more on non-essential goods. INFLATION SQUEEZE PEAKING? Rising inflation has eaten into British consumers' disposable income this year, causing the weakest first quarter for retail sales since 2010, as the fall in the pound after last year's Brexit vote pushed up the cost of the imports. The narrower measure of inflation used in retail sales data rose to an annual rate of 3.2 percent in August, up from 2.7 percent.

Retail prices increased across all store types on the year, with non-food stores and non-store retailing recording their highest year-on-year price growth since March 1992, at 3.2% and 3.3% respectively.

On a three-monthly basis, the volume bought increased 1.2%.

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