UK retail sales unexpectedly rise 0.5% in September, boosting economy

UK retail sales unexpectedly grew for a fourth consecutive month in September, a surprising show of resilience from the British consumer that provides a glimmer of hope for an economy that has recently shown signs of cooling.

The volume of goods sold online and in stores climbed 0.5% month-on-month, the Office for National Statistics said on Friday.

The figure was considerably better than the 0.4% drop that economists had been expecting and follows an upwardly revised 0.6% gain in August. The pound erased a small drop to trade steady after the data was released.

Strong demand for non-food items drives growth

The retail sector held up despite the arrival of wet and cool weather after a scorching summer.

According to the ONS, sales volumes have now hit their highest level since July 2022, with non-food sales climbing a strong 0.9% in the month.

Sales in household goods stores rose sharply, while online retailers also enjoyed another positive month, with online jewelers in particular reporting strong demand for gold.

Economists suggested that consumers may have rushed to buy jewellry after seeing reports of the precious metal's surging price.

A positive contribution to Q3 GDP, but a full revival is 'some way off'

The strong performance of the retail sector is set to provide a tangible boost to the UK's overall economic growth for the third quarter.

“Retail spending made a positive contribution to GDP in Q3, the strongest since Q1 2024,” Martin Beck, chief economist at WPI Strategy, told Bloomberg.

He noted that with households still holding significant savings, there remains scope for a pick-up in spending if confidence continues to improve. 

“But for now, a full retail revival still looks some way off,” he added.

The unexpectedly strong data complicates the picture for the Bank of England, which is set to make its next interest rate decision on November 6.

A deteriorating jobs market and stuttering growth had recently prompted traders to increase their bets on a rate cut before the end of the year.

However, with inflation remaining stubbornly high and the consumer now showing surprising strength, the case for immediate easing has been weakened.

Consumers are undeterred by the prospect of tax hikes

Remarkably, the strong spending figures come at a time of growing speculation about painful tax hikes in Chancellor of the Exchequer Rachel Reeves’ upcoming budget on November 26.

A separate report from GfK on Friday showed that its household confidence gauge actually edged up two points in October, matching its highest level of 2025.

GfK’s indicator for sentiment around buying big-ticket items also rose to its highest point since early 2022, a clear sign that, for now, the British consumer remains defiant in the face of economic headwinds.