UK retail sales and consumer confidence both improved more than expected last month, according to fresh data on Friday.
The GfK consumer confidence index improved for the fourth month in a row, rising to -24 in June from -27 in May, above the consensus forecast of -26.
Since January the index has increased from -45, including improvements in how people view their personal finances in the next 12 months, despite worries about rising interest rates and the chance it will result in a recession.
Joe Staton, GfK client strategy director, said: "The cost-of-living crisis has been part of our daily financial reality for a long time, with double-digit inflation and record-high food prices. But despite those pressures, May sees an encouraging three-point uptick in consumer confidence."
He said the headline index score of -27 means we’re "still deep in negative territory and a long way from any ‘sunny uplands’.
"However, the overall trajectory this year is positive and might reflect a stronger underlying financial picture across the UK than many would think. But everybody must hold on tight as it could still be a rocky ride out of these tough times."
Meanwhile, the Office for National Statistics reported that total retail sales volumes, including petrol, rose by 0.3% month-to-month in May, which was higher than the consensus forecast, -0.2%.
Year-over-year retail sales were down but less than the previous month, moving to -2.1% in May from -3.4% in April, which was again better than the average forecast of -2.5%.
Sales rising on the month as saw weaker food sales around the bank holiday were offset by stronger online spending, which the ONS put down to the warmer weather.
Online shops did particularly well selling outdoor goods and summer clothes, while May also saw a return to growth for fuel sales after a dip in April.
“Garden centres and DIY stores also saw growth, as the good weather encouraged people to start home and garden improvements," said ONS senior statistician Heather Bovill.
“These were offset by food sales, which fell back as prices in supermarkets continued to rise, exacerbated by many people ordering takeaways and drinking out more during the extra bank holidays, while jewellery and art also fell back after a strong April.”
Economists at ING said the good weather "seems to have been a key driver of recent month-on-month sales volumes, which otherwise have essentially flatlined in real terms for a number of months now."
They added that is did not necessarily mean UK GDP won’t have temporarily contracted during May.
"But the recent trend in retail activity suggests the worst is behind us for UK retailers, at least for now. A simple mapping of real wage growth against sales points to a very modest rebound in volumes over the coming months. The recent recovery in consumer confidence points this way too."
Martin Beck, chief economic advisor to the EY ITEM Club, said he thinks that persistent inflationary pressures and rising mortgage costs mean a sustained retail renaissance is unlikely in the near-term.
"Although today’s retail release showed growth in shop prices slowing to a 16-month low, overall inflation is proving uncomfortably sticky, suggesting that it will take longer for real household incomes to return to growth," he said.
"Relatedly, the Bank of England raised interest rates by more than expected yesterday, and the rate rise cycle may have further to run. This will add to the debt service costs of the 2.5mn households exposed to higher mortgage rates during 2023."