Last month's sales figures released by the CBI in the quarterly Distributive Trade Survey (DTS) exceeded sales expectations and showed significant growth, particularly in the grocery sector.
The survey which covers 20,000 companies involved in retailing, measures growth across the sectors and reported that two thirds of survey participants experienced a rise in sales in comparison to May 2003 and many expect similar results for June.
However, the strong sales growth did not stop employers from job cutting jobs but they expect cutting to slow down.
Chairman of the CBI's DTS panel John Longworth said: "Strong consumer spending is fuelling the economy and this survey shows it is gathering momentum. Price promotions and warmer weather have contributed but rising take-home pay, low unemployment and a strong housing market are the key drivers of consumers' willingness to spend."
The pressure form competition are keeping prices low and encouraging shoppers to buy while at the same time squeezing margins for retailers and reduce capital expenditure.
Most of the retail sectors reported higher sales year-on-year to May and grocers reported the strongest growth behind footwear and leisure. City analysts said the strong retail numbers would encourage the Bank of England's monetary policy committee to potentially increase rates.
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