U.K. Retail Sales, Auto Output Up In May

LONDON (AP) -- Retail sales in Britain rose 4.4 percent in the year to May while vehicle production soared by 59 percent, two reports said Thursday, suggesting the economic recovery from a deep recession is continuing for a third quarter.

The figures indicate consumer spending is holding up better than expected, though the outlook is clouded by looming cuts in public expenditure and possible tax hikes.

The Office for National Statistics said retail sales rose by 0.4 percent from April to May, but half of that gain reflected rising prices for gas.

Vicky Redwood, economist at Capital Economics, said sales in the second quarter were on course for a strong rise.

"But with consumer incomes about to be hit by tax rises and cuts in public sector employment and wages, we doubt that this resilience will last," Redwood said.

The statistics agency said the value of sales from predominantly food stores rose 1.4 percent, while nonfood stores posted a 5.4 percent gain.

Non-specialized store sale rose 8.5 percent and textile, clothing and shoe store sales rose 6.6 percent.

The Society of Motor Manufacturers and Traders said car production rose was up 54 percent in May compared to last year, while commercial vehicle production more than doubled.

A year ago, Britain was just beginning a cash incentive program for new car buyers who traded in a car more than 10 years old. That program has now expired.

About 70 percent of British vehicle production is for export, so the industry's worries stretch beyond the U.K. economy.

"There is concern that fiscal consolidation across Europe may impact demand in the months ahead," said Paul Everitt, the SMMT's chief executive.

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