Shoppers ignore debt concerns

Shoppers ignore debt concerns

Consumers ignored warnings about ballooning household debt and hit the high streets last month, prompting predictions from City analysts that more interest rate rises will be needed to rein in Britain's determined shopping army.

Retail sales rose in January at their fastest annual pace for more than a year, up by an unexpectedly strong 0.6% over the month, the Office for National Statistics reported yesterday.

The turnaround in retail sales volumes which began last autumn is now firmly established, analysts said.

"Households do not appear to have been deterred from spending by the November rate hike, nor will they, we suspect, by February's," said David Page from Investec.

The strength of retail spending helped swell the Treasury's coffers over the month, leading to predictions that Gordon Brown is back on track to meet his forecast for public borrowing this year.

The public sector chalked up a £4.4bn surplus over the month, taking the cumulative total of borrowing for the year to date to £30.6bn.

"Borrowing is broadly on track to meet the chancellor's latest full-year forecast of £37bn," said Jonathan Loynes, chief UK economist at Capital Economics.

The strong sales figures were backed by new data showing that the big retail banks lent £5.9bn worth of new mortgages in January, the largest monthly increase since November 2001.

Total net lending to individuals rose by £6.6bn, with mortgage.....continued below

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lending accounting for the lion's share.

"It's too soon to see any impact of the latest quarter-point rise in interest rates on mortgage demand, but the major banks continued to see above-trend mortgage lending in January," said David Dooks, director of statistics at the British Bankers' Association.

Last month's mortgage lending figure is well above the recent monthly average of £5.4bn.

By contrast, credit card borrowing remained "subdued", with spending being largely offset by repayments.

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