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Argos, the catalogue retailer, issued a warning on consumer spending yesterday saying the current bouyancy was not sustainable, writes Nigel Cope. Chief executive Mike Smith described the so-called consumer boom as patchy and said the windfall factor, created by millions of building society customers enjoying large payouts, would run out of steam towards the end of the year as higher interest rates took their toll.

"If consumer confidence was there you would be seeing more liberal buying," Mr Smith said. "But it is patchy and selective. It is our view that once people have spent what they want to of the windfalls they will not then dip into savings. We think there will be a slowdown."

Mr Smith was speaking as Argos announced lower half profits of pounds 28.1m compared to pounds 31.8m the previous year. Stripping out new store openings, sales are growing at 8 per cent in current trading which he warned might not be sustainable.

Sales of consumer electronics, furniture and small domestic appliances were strong, helped by building society windfalls. However, sales of DIY goods, gifts and toys were weaker.

Argos said it hoped to benefit from the proposals to ban recommended retail prices for electrical goods. The company has cut its prices in its current catalogue in an attempt to maintain its price differentials.