BRITISH consumer spending showed robust growth in April and the country's leading business organisation said interest rates would continue rising to stop inflation getting out of hand.
The Office for National Statistics (ONS) said retail sales rose a seasonally adjusted 0.1 per cent in April, giving an annual growth rate of 4.7 per cent compared with 4.4 per cent in March.
Economists said the Bank of England, newly empowered by the Labour government to set monetary policy, was likely to view the figures as further evidence that economic growth needed to be checked by higher interest rates.
The ONS revised down its estimates of growth in gross domestic product (GDP) in the first quarter to 0.9 per cent from the initial figure of 1 per cent, but left the annual rate unchanged at 3 per cent.
"Despite the downward revision to GDP estimates in the first quarter of the year, growth remains too strong to be sustained indefinitely without triggering inflationary pressures," said Mr Alex Garrard, an economist at UBS.
The Confederation of British industry (CBI) predicted robust growth over the next two years, with GDP likely to average 3.1 per cent in 1997 and 2.7 per cent in 1998.
"The buoyant outlook largely reflects higher consumer spending growth due to higher real incomes and greater windfall gains than previously assumed," it said.
The CBI was referring to the generous payouts millions of Britons will receive when some mutually owned building societies and insurance companies are floated on the stock exchange this year.
"In contrast, weaker export growth than last year is still expected due to the strength of sterling," the CBI added. It expects official interest rates, now 6.25 per cent, to rise to 6.75 per cent by the end of the year and 7 percent next year.
The CBI's industrial trends survey for May showed demand for British manufactured goods remained weak, with export demand in particular at its lowest level since November 1993.
