LONDON, Feb 21 (Reuters) - British retail sales rose by a much stronger-than-expected 1.7% in January, the biggest increase since May last year, according to official data published on Friday that suggested consumers were happy to spend despite a weak outlook for the economy.
The gain in sales volumes was bigger than all estimates forecast in a Reuters poll of economists which had shown a median forecast of a 0.3% increase.
Sterling rose in value against the dollar immediately after the data was published.
The month-on-month sales increase was the first since August. Retail sales volumes for the three months to January fell by 0.6% compared with the previous three months, reflecting the weakness at the end of last year.
Retail sales were 1.0% higher than a year ago, compared with a median forecast for 0.6% annual growth.
Most of Britain's major retailers, including Next and Marks & Spencer, have flagged a tougher year ahead as employer tax increases, and their potential impact on prices and employment, filter through into the economy.
Data published earlier this week showed inflation rose by more than expected in January while hiring and pay growth were also stronger than expected. However the Bank of England this month halved its forecast for economic growth in 2025.
Supermarket groups Sainsbury's, Tesco and Morrisons have announced 3,600 job cuts in recent weeks.
A survey published earlier on Friday showed British consumers turned a little less pessimistic this month as the BoE's latest interest rate cut led to an improvement in expectations for their household finances.
Writing by William Schomberg; Editing by Kate Holton
Source: Reuters