British retail sales soared unexpectedly in January as Britons splashed out on furniture and sports goods, adding to signs that the economy is returning to growth.
The Bank of England and the government are hoping that consumers will spend more this year to support the fragile economy because inflation is falling.
A raft of strong business surveys and evidence of stabilisation in the labour market have raised hopes that Britain will avoid recession after an economic contraction in the last three months of 2011.
Data from the Office for National Statistics showed yesterday that retail sales volumes rose 0.9 per cent on the month to give an annual rise of 2.0 per cent.
An improvement in consumer confidence, aided by falling inflation, and traditional January discounting may have lifted sales during the month, boding well for GDP growth in the first three months of this year.
"It suggests at the very least that we will be growing by 0.5 per cent quarter-on-quarter in the first quarter and probably faster than that," said Scotia Capital economist Alan Clarke.
Economists had forecast a monthly fall of 0.4 per cent in sales. This compares with a monthly rise of 0.6 per cent in December, when shops lured cash-strapped customers with hefty pre-Christmas discounts.
Sterling rose and gilt futures extended losses after the January retail sales data, which showed the strongest increase since April 2011 when warm weather and Britain's royal wedding boosted sales.
The ONS noted that retailers' promotions on household goods and furniture helped drive the monthly increase in sales in January.
The latest data chimes with other recent signs of a tentative recovery in all-important consumption, which accounts for more than 60 per cent of Britain's output.
A survey by lender Nationwide showed that British consumers' confidence rose in January to its highest level since August as they grew much more upbeat about the following six months.
Moreover, only 47 per cent of grocery shoppers now believe they will be worse-off in the year ahead compared to 61 per cent a year ago, a survey by IGD ShopperVista showed, while retailer John Lewis said its department store sales rose 4.1 per cent on the year in the week to February 11.
- 0.9%: rise in retail sales on the month in January
- 0.4%: fall in sales predicted by economists
- 0.6%: monthly rise in sales in December