In February 2025, retail sales in the United Kingdom unexpectedly rose by 1%, defying analysts' predictions of a 0.4% decline, according to the Office for National Statistics (ONS).

Retail sales volumes also rose by 0.3% over the three months leading to February, marking the first increase since November 2024.

This increase was primarily driven by higher spending in department stores, hardware shops, and clothing outlets, with household goods stores experiencing the largest sales growth at 6.8%.

Despite the positive sales figures, food sales dropped by 2% from the previous month, attributed to an increase in dining out.

Chancellor Rachel Reeves is likely to welcome these figures, especially after the government's economic forecaster recently cut growth projections for 2025 by half.

Overall, retail sales were 2.2% higher compared to the previous year, surpassing the median forecast of 0.5% annual growth.

Despite the recent uptick in sales, retail levels still remain below pre-pandemic figures, indicating ongoing challenges in the sector.

Households have been saving more, with the savings ratio rising to 12% in the last quarter of 2024, reflecting a cautious approach amid ongoing economic uncertainty.

Economist Elliott Jordan-Doak predicts continued growth in retail sales throughout 2025 as households gradually spend down their savings, although challenges from rising inflation and interest rates loom.

While the economy appears healthier than expected, business confidence remains low, which may lead to decreased business investment.

Future economic conditions are uncertain due to upcoming tax hikes on employers, higher energy bills, and a raised minimum wage set to take effect in April 2025.

The UK economy grew by 0.1% in the last quarter of 2024, with revised growth estimates indicating a slight improvement in economic conditions.