(RTTNews) - UK retail sales unexpectedly rose in May, boosted by food and clothing sales. Sales volume increased at the highest pace in more than 20 years.

According to data released by the Office for National Statistics, ONS retail sales grew 3.5% month-on-month in May, marking the largest increase since the series started in 1986. Economists were looking for a 0.1% decline in May, following a fall of 0.3% for April. The number for April was revised down from a 0.2% fall reported earlier.

Compared to last year, retail sales jumped 8.1%, much higher than the 4.1% increase expected by economists. April’s growth was revised down to 3.8% from 4.2%. Annual retail sales grew at the fastest pace since April 2002 when it was 9.1%. The implied price deflator dropped 0.3% on an annual basis in May driven by decrease in all sectors, excluding food stores. The deflator started its declining trend in July 2007.

The ONS said retail sales in May were boosted by the food and clothing sectors. Sales volume for predominantly food stores were up 4.7% and non-food stores sales climbed 9.9%.

Further, retail sales value growth accelerated to 7% annually, reached the highest growth in six years. Both predominantly food stores and non-food stores reported a faster growth in May. The average weekly sales were valued in May at GBP5.3 billion.

In three months to May, sales volume rose 1.8% over the previous three months. Compared to the same period of 2007, seasonally adjusted sales climbed 5.4% mainly led by 6.2% rise in non-food stores sales.

Commenting on retail sales report, Raymond Van Der Putten, an economist at BNP Paribas said if the retail sales data remain strong, the probability of a rate hike in August increases. Reports confirmed that prices are rising in the High Street. Retail sales data indicate that the price outlook might not be so rosy, as consumers do not seem to slowdown their spending, economist stated.

Annual inflation accelerated to 3.3% in May from 3% in April, forcing the central bank governor to pen an open letter to the country’s chancellor, in which he warned that the rate will rise significantly later in the year.

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