* UK retail sales grow at fastest rate since January 2011
* Hot weather, royal baby, sporting success boot sentiment
* Retail figures continue positive trend for UK data
By David Milliken and Christina Fincher
LONDON, Aug 15 British retail sales rose at
their fastest annual rate in over two years in July as a heat
wave boosted sales of barbecue food and outdoor items, adding to
signs that third-quarter growth has got off to a strong start.
Retail sales volumes jumped 1.1 percent on the month -
almost twice as fast as expected - to give an annual rise of 3.0
percent, the highest since January 2011, official data showed on
Ten-year gilt yields briefly returned to a near
two-year high after the data, as traders speculated the economy
might recover faster than the Bank of England expects,
triggering an earlier-than-planned interest rate rise.
"Wow again. It's hard to remember the last time a UK data
release wasn't stunningly positive," said Rob Wood, UK economist
at Berenberg Bank. "Low interest rates, a sunnier outlook and
rising house prices are getting consumers out consuming."
Last week new Bank of England Governor Mark Carney said the
central bank would not raise interest rates until unemployment
sank to 7 percent, something he forecast would take three years.
But many in the markets are betting a rate rise could come
sooner - a view that was reinforced on Wednesday by robust jobs
data and concern from one BoE policymaker that Carney's guidance
policy had inadequate safeguards against high inflation.
Britain's economy grew an unusually rapid 0.6 percent in the
three months to June, and some economists say third-quarter
growth could be faster, with support to consumer morale from
government schemes to aid house purchase.
"At the minute this is a sugar rush of low interest rates
but there's a good chance it can broaden out into something more
sustainable over the next year," Wood said.
Others question how long a recovery currently largely driven
by consumer spending can continue at a time when inflation is
still rising faster than wages.
"People are prepared to spend more than they earn. This is
bad growth - but I'd rather have bad growth than no growth,"
said Alan Clarke, an economist at Scotiabank.
The Office for National Statistics said feedback from
supermarkets suggested the sunny weather had boosted sales of
food, alcohol and clothing, with supermarket sales growing at
their fastest annual rate since April 2011.
This echoes the message last week from the British Retail
Consortium, which represents large chains. The BRC said its
members enjoyed their best July since 2006 with sales up 3.9
percent on the year in value terms, with the weather effect
bolstered by a feel-good factor from British sporting success
and a royal baby.
ONS figures showed that retail sales values - which unlike
the volume measure are not adjusted for inflation, rose an
annual 4.9 percent - the highest since March last year.