The retail sales figures are likely to fan speculation that the economy will start to grow again in the third quarter

Britain’s economic recovery prospects were given a boost today on news that spending in the high street rose sharply last month.

June’s fine weather and early summer sales led to a rush for the shops and the volume of sales was 1.2% higher than in May, according to the latest data from the Office for National Statistics.

June’s jump in spending in shops and stores was three times the 0.4% increase expected by the City and more than reversed May’s 0.9% drop.

Retail sales account for around one third of consumer spending and have held up reasonably well in the face of the economy’s descent into recession over the past year. Sales were 2.9% higher last month than they were in June 2008, despite rising unemployment and weak growth in earnings.

Broader measures of consumer spending – including sales of cars and spending on restaurant meals – have been less buoyant, but today’s figures are likely to fan speculation that the economy will start to grow again in the third quarter.

A breakdown of the ONS figures showed that the good weather encouraged spending on summer clothes, footwear, outdoor leisure goods and food.

Price cuts also helped to woo consumers into the shops. The retail sales deflator – a measure of inflation on the high street – showed an annual fall of 0.2% last month against a rise of 0.7% in May.

In the past, July has been the peak month for summer bargains, but the fall in the deflator suggests retailers brought forward sales this year.

Kitchens, bathrooms and bedrooms

The official data reflects recent upbeat noises from Britain’s big retailers, who have seen shoppers shrug off the recession and splash out on summer clothes in the recent heatwave.

DIY sales have also held up better than expected. B&Q owner Kingfisher today posted forecast-beating figures, highlighting strong UK trading in kitchens, bathrooms and bedrooms.

“We have continued to perform well in a tough environment, profitably growing market share [and] strengthening our leadership position in Europe,” said the chief executive, Ian Cheshire.

B&Q like-for-like sales grew 0.7% in the 10 weeks to 11 July.

Earlier this week Next and Morrison’s cheered the market with announcements that they are on course to turn in better than expected profits this year.

Morrisons, the UK’s fourth biggest supermarket chain, and Next, the second biggest fashion chain, expect to rake in a combined £100m more than City analysts had forecast.

But economists cautioned that consumer spending would remain on shaky ground for some time to come.

“Sharply reduced mortgage payments and moderating inflation are boosting many people’s purchasing power, thereby making them more able and willing to step up their discretionary spending when circumstances are particularly attractive, such as when the weather is hot or when there is increased discounting,” said Howard Archer, economist at Global Insight. “Nevertheless, consumers remain under serious pressure from sharply higher and rising unemployment, markedly reduced earnings growth and heightened debt levels.”

“On balance, we suspect that consumer spending will be largely muted over the coming months, thereby limiting recovery prospects, especially as unemployment is likely to rise markedly further and earnings growth is continuing to moderate.”