British retail sales rose more than twice as fast as expected in December as stores enjoyed a busy Christmas.
The Office for National Statistics said today sales rose 1.1 per cent on the month, the biggest monthly rise since June 2005, and the best December reading since 2003. That took the annual rate up to 3.7 per cent.
The pound jumped on the foreign exchanges and interest rate futures fell as investors bet the Bank of England would not be slow to raise borrowing costs again.
Evidence that retailers achieved robust sales without cutting prices only added to the view that policy-makers may be facing a prolonged battle against inflation.
Prices were 0.2 per cent higher in December than a year ago, the fourth consecutive monthly increase. This marked the longest period of price rises since April 1999 and suggested an era of high street deflation may be over.
Separately, the ONS said the public sector posted a net cash requirement of just over £13 billion sterling last month, slightly less than the 15.1 billion forecast by analysts.
The government's preferred accruals-based measure showed borrowing of £7.2 billion, broadly in line with expectations.