Retail sales bounced back sharply in January, rising by 1% on the previous month, official figures showed.
The Office for National Statistics (ONS) said the amount of goods sold rose by 1%, after falling by 0.7% in December, with discounts in clothing helping to boost sales.
Compared with a year ago, retail sales were 4.2% higher in January.
That was the biggest annual rise since December 2016. The figures beat most economists’ expectations.
“Clothing stores saw strong sales, luring consumers with price reductions, with food sales also growing after a slight dip after Christmas,” said ONS statistician Rhian Murphy.
The ONS said clothing prices fell by the most since August 2016.
The figures suggest that consumer spending may have picked up again after a lull following the summer’s World Cup.
The findings also echo those from the British Retail Consortium, which indicated that shops saw their fastest sales growth for seven months in January.
Other recent data has shown wages picking up after years of stagnation and rising faster than inflation.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “January’s jump in retail sales shows that most households have maintained a happy-go-lucky mentality, despite the fraught political situation. While consumers’ confidence is down, this reflects rather fuzzy expectations that Brexit might be costly eventually.”
But he added that although low confidence would prompt consumers to hold back from buying cars, booking holidays and moving home, he thought the High Street would be protected.
UK inflation falls to two-year low in January
UK inflation fell to a two-year low in January, dragged lower by falling energy bills and fuel.
The Office for National Statistics said the Consumer Prices Index (CPI) was 1.8% last month, from 2.1% in December.
January’s fall, partly offset by higher air and ferry fares, was bigger than economists’ forecasts and comes as latest data shows wages rising by 3.3%.
Inflation peaked at a five-year high of 3.1% in November 2017, and was last at 1.8% was in January 2017.
Economists had forecast that CPI would fall in January to 2%, the Bank of England’s inflation target.
Some economists think it is unlikely that inflation will fall much more. For instance, Ofgem’s energy price cap may not suppress inflation for long, as the cap is due to rise in April.
Andrew Wishart, UK economist at Capital Economics, said: “The fall in CPI inflation below the Bank of England’s 2% target for the first time in two years in January provides a further boost to households’ real spending power, but we doubt inflation will fall any further.”
Much could depend on the course of the Brexit negotiations, according to Howard Archer, chief economic advisor to the EY Item Club.
“Domestic inflationary pressures are expected to pick-up only modestly over the coming months amid likely limited UK growth,” said Mr Archer.
Assuming there is a Brexit deal, he said inflation could stay below 2% this year – and even dip to 1.6%.
If there is not a deal, Mr Archer said the picture would be different and the Bank of England could cut interest rates as “economic activity would likely take a significant hit”.