British retail sales rose twice as fast as expected last month while government borrowing posted a record deficit for a July, official data showed today.
The Office for National Statistics said sales rose 0.4 per cent on the month in July, taking the annual rate to a gain of 3.3 per cent - its highest since May 2008.
Analysts had predicted a monthly increase of just 0.2 per cent following an exceptionally strong June - which was revised higher to show growth of 1.3 percent.
Sterling rose and gilt futures fell after the stronger than expected figures boosted investor confidence that Britain's worst recession in decades is bottoming out.
“The gains in retail sales give us greater confidence that GDP will rise in the third quarter, meaning that the UK exits recession,” said James Knightley, an economist at ING.
European peers Germany and France pulled themselves out of recession in the second quarter while the British economy shrunk by 0.8 per cent.
Separate government borrowing figures were much worse than expected for July -- normally a surplus month - underlining the collapse in tax revenues as a result of the recession.
Public sector net borrowing came in at £8.016 billion sterling, when analysts had predicted a deficit of £500 million and compared with a surplus of more than £5 billion last year.
That was a record deficit for the month of July and also the first time the government accounts have been in the red in that month since 1996.
Reuters