U.K. May retail sales significantly surprised to the upside printing a 3.5% jump against expectations of a 0.1% decline, which was the biggest increase since records began in 1986. The rebound ended consecutive monthly declines of 0.3% declines in April and March and prevented the first decline for three consecutive months since 1991. A 9.2% increase in clothing sales from a 2.1% decline in April, as Britons continued their penchant for shopping. The warmest May ever saw shoppers load up on seasonal foods and clothing lifting annualized sales 8.1% from 3.8% the month prior. A separate report showed Public sector net borrowing jumping to 11 billion from 1.8 billion in April. These results signal that the credit markets may be loosening and that energy and food prices may be starting to ease. The news will allow the BoE to keep interest rates on hold as they continue to monitor the upside risks of inflation. Central Bank governor Mervyn King had warned earlier that wages will stagnate and the rising energy costs will squeeze consumers. He also asked Britons not to panic and demand higher wages as the period will be short lived. Therefore, next months sales numbers will serve as a better indicator of the longer term trend, and whether May’s results were a side effect of the abnormal weather in the region. – [I]John Rivera, Currency Analyst[/I]