UK retail sales surge, adds to rate rise pressure

British retail sales steamed ahead in April, further evidence that March's dip in sales could have been just a blip, a key industry survey showed on Tuesday, adding pressure on the Bank of England to raise interest rates.
The Confederation of British Industry said 51 percent of firms said sales were up on a year ago while 21 percent said they were down, giving a balance of plus 30 percent.
That was much higher than the plus 17 percent balance in March and just above the plus 29 retailers themselves predicted a month ago. The CBI explained the strength by saying Easter sales were particularly strong.
Despite the surge in retail sales, the CBI urged the BoE to stick to its gradual approach in raising interest rates.
"With little sign of a slow-down in high street activity, the economy continues to grow well. If this continues interest rates will have to increase to a more neutral level later this year," said John Longworth, head of the survey.
"But the Bank must be careful not to stifle the economic recovery by abandoning its well-signalled, gradualist approach to rate rises," he said.
Yet analysts are nearly unanimous in expecting the BoE to raise borrowing costs by another quarter point to 4.25 percent at this meeting.
"The CBI says it would 'understand' if the BoE raised rates on Thursday - surely the ultimate sign that a UK rate rise this week 'is baked in the cake'," said Ian Stewart, economist at Merrill Lynch.
STRONG SALES EXPECTED TOO: The CBI said retailers are predicting strong sales in May with the balance seen rising to plus 34. That was the highest expectations balance since December.
The balance of orders placed with suppliers reached a two-year high of plus 35 last month.
The survey, conducted between March 31 and April 21 also showed wholesalers' sales growth in April reached the strongest level for almost two years. This followed a dip in sales in March.
Motor traders reported a firm increase in sales over the year to April. Sales were above average for the time of year but the growth rate balance has slowed from last month's record high of plus 54.