High street retailers hike-up prices to cash in on spending boom

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Figures from a CBI survey of retailers reveal that 47 per cent of shops have pushed prices higher than they were a year ago - the highest proportion since May 1998.

Retailers also expect to introduce further price rises over the next three months, according to the study.

The CBI said retailers were being egged on to up prices by the consumer spending boom.

More than 50 per cent of shops surveyed for the CBI's Distributive Trades Survey said sales were up in May, with just 21 per cent reporting a reduction in business.

The results of the monthly study comes as a separate survey by pollsters GfK NOP shows consumer confidence is running at its highest level for nearly two years.

Howard Archer, economist at Global Insight, said the CBI survey findings will increase the likelihood of a further interest rate rise this summer, on top of the four since last August.

"The survey indicates that consumers spent at a fair clip in May and, very worryingly for the Bank of England, that retailers are looking to take advantage of relatively healthy spending by pushing through more price increases," he said.

"This can only reinforce the Bank's concern over companies' pricing power and bolsters the case for another 25 basis points interest rate hike sooner rather than later."

But the CBI said there were some signs soaring sales and price rises may abate over the coming months.

John Longworth, chairman of the CBI's Distributive Trades Panel, said retailers expected that the recent rate rises "may yet cause consumers to tighten their belts", as shops forecast a slowdown in sales growth over the coming months.