Economic gloom abounds, except in UK shops

By Gerrard Raven

LONDON (Reuters) - A sharp rise in British retail sales pierced the global economic gloom like a rare shaft of sunlight on Thursday, but other developments showed that hopes that storm clouds would disperse were premature.

A Reuters survey said business pessimism was spreading in Japan, Italian data pointed to lengthening jobless queues, and the Swiss National Bank, which kept its key interest rate on hold, confirmed it expected economic growth to slow.

News of a 3.5 percent rise in British shop sales in May, the sharpest month-on-month increase since the data series began in 1986, came hours after Bank of England governor Mervyn King said the economy was slowing and needed to do so to cool inflation.

Record sales of food and clothing, probably boosted by sunny weather, pushed retail volumes up despite expectations of a 0.1 percent decline.

"A big surprise," said Mark Miller, economist at HBOS. "It may very well be a weather-related issue for this particular month, but it's very difficult to see a strong trend in retail sales persisting throughout the year."

The news contrasted with King's speech on Wednesday evening when he told bankers the City of London business district: "We believe that a slowdown in the economy this year, creating a margin of spare capacity, will be necessary to dampen price and wage pressures."

The retail sales figures also contradicted a succession of gloomy data from around the world.

A Reuters survey in Japan showed business pessimism is spreading from manufacturers to the service sector, reflecting weak domestic demand and the impact of rising prices for raw materials.