Retail sales bounce back in Great Britain amid brighter signs for economy

Retail sales across Great Britain unexpectedly rose last month, the latest economic indicator to defy gloomy forecasts as chancellor John Healey prepares to present next month’s budget.

The Office for National Statistics (ONS) said that the volume of goods sold rose 0.5% month-on-month in August, defying analyst expectations of a 0.2% fall.

It marks a significant bounce back in consumer spending after a 0.5% month-on-month fall in July.

The summer heatwaves fuelled increased sales of items including fans, air-conditioning units, sports merchandise and clothing in the three months to August.

The unexpected sales boost is the latest positive update on the state of the economy for the government, after a surprise 0.4% increase in gross domestic product (GDP) in July that was reported by the ONS last week.

“August’s warm weather delayed the usual shift towards autumn purchases, but retailers successfully kept consumers spending,” said Sandra Prince, head of consumer at Lloyds. “The late bank holiday weekend and back-to-school shopping are also likely to have supported demand, with online sales among the areas seeing the biggest boost.”

Across the three-month summer period sales rose 2.4% year-on-year, again significantly above forecastsof a 1.9% rise.

Among the strongest performers were department stores, which recorded a sales rise of 1.8% month-on-month in August, which marked a bounce back after a fall in July, which the ONS attributed to stock availability issues.

Non-store retailing, primarily online shopping, rose by 1.7% month-on-month fuelling a strong summer which recorded a 5.4% sales rise across the three-month period.

Retailers selling alcohol and beverages performed well across all three months to August 2026, the ONS reported, which they attributed to promotions, the hot weather, and the World Cup.

Fuel sales dropped again, down by 1.7% in August and 2.5% across the three-month period, as motorists cut back on non-essential journeys after big increases in the price of petrol and diesel since the start of the Iran conflict in February.

UK petrol prices have hit the highest level in four years as the conflict in the Middle East intensifies.

On Thursday, the Bank of England monetary policy committee voted to hold the base rate at 3.75%. However, it indicated that the latest surge in energy prices due to the conflict is likely to result in a rates increase to keep inflation in check. Inflation rose to 3.1% in August, from 2.9% in July.

“There are some challenging headwinds for consumers to navigate as we head into autumn,” said Andy Carlisle, consumer goods and retail lead at Accenture.

“Higher energy bills, food, fuel and transport prices continue to weigh on purse strings. We’re beginning to see consumers preparing for these pressures, prioritising everyday needs while showing greater caution around discretionary and bigger-ticket purchases.”