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August 21, 2009

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Data signal Britain pulling out of slump

RETAIL sales pushed higher than forecast for the second consecutive month and mortgage lending rose in July, boosting confidence that Britain is pulling out of its worst recession in decades.

But government borrowing figures for the same month were far worse than expected, underlining the task ahead for the government as tax revenues fall because of the downturn.

Retail sales rose 0.4 percent in July as a recovery in the housing market drove demand for furniture and electrical items, taking the annual growth rate to 3.3 percent - its highest level in 14 months.

The Office for National Statistics also revised up June's strong 1.2 percent monthly rise, boosted by demand for summer clothes and outdoor products thanks to warm weather, to 1.3 percent.

The July sales, beating forecasts of a smaller 0.2 percent lift, were underpinned by a 4.5 percent rise in household goods store sales, the highest rise since August 2006.

The returning confidence in the housing market was underscored by a separate report from the Council of Mortgage Lenders showing that mortgage lending jumped by 26 percent in July.

"The gains in retail sales give us greater confidence that gross domestic product will rise in the third quarter, meaning that the UK exits recession," said ING bank economist James Knightley.

A gain in third-quarter GDP would follow a 0.8 percent loss in the second quarter of the year and a 2.4 percent fall in the first quarter.


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