Sept. 4 (Bloomberg) -- U.K. retail sales picked up in August as sunnier weather encouraged shoppers to buy more food and drinks, the British Retail Consortium said.
Revenue at stores open at least a year rose 1.8 percent from the same month in 2006, up from 1.2 percent in July, the lobby group, which represents 80 percent of Britain's retailers, said today in London. Total sales rose an annual 3.7 percent. The survey covers the period from July 29 to Aug. 25.
Consumer spending, which quickened in the second quarter, is helping to drive the U.K.'s fastest growth since 2004 and has yet to show signs of weakening from higher borrowing costs. The Bank of England will probably keep its key interest rate unchanged at a six-year high this week after five increases in a year.
``Food and groceries have done significantly better than in June and July,'' said Kevin Hawkins, the group's director general, in an interview. ``The August figure is a big improvement.''
Shoppers bought barbecue and picnic foods, chilled drinks and beer and wine as the weather improved in August from July, the group said. England and Wales had the wettest May, June and July since records began in 1766, according to the Met Office, the government's weather agency.
John Lewis Partnership Plc, Britain's biggest department store company, said Aug. 31 that sales at its Waitrose supermarket chain rose an annual 6.4 percent in the week through Aug. 25.
Rate Decision
Bank of England policy makers begin a two-day meeting tomorrow to decide on interest rates. Inflation slipped below their 2 percent target in July for the first time since March 2006. All 60 economists surveyed by Bloomberg News predict the bank will keep the rate at its current 5.75 percent on Sept. 6.
The Bank of England should avoid raising the benchmark rate because inflation is showing signs of receding while consumers are starting to respond to higher borrowing costs, Hawkins said. Britons have record debts of 1.3 trillion pounds ($2.6 trillion).
``The last thing we need is another increase in interest rates,'' Hawkins said. ``The five successive rate increases are now having an effect.''
The annual gain in same-store retail sales was lower than the 2.5 percent increase recorded for August last year, the group said today. A separate index of U.K. retail sales slipped to the lowest reading since November this month, a report by the Confederation of British Industry showed Aug. 30.
Government data have yet to show a weakening consumer. Spending rose 0.8 percent in the second quarter, up from 0.5 percent in the previous three months. Retail sales rose the most in five months in July.
The U.K. economy will expand 2.9 percent in 2007, the most in three years, according to International Monetary Fund estimates published July 25. That compares with forecasts of 2 percent for the U.S. and 2.6 percent for the 13 euro countries and Japan.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net .
Last Updated: September 3, 2007 19:00 EDT
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