Retail sales rose by 1.1% in July compared with June, according to Office for National Statistics (ONS).

This is the highest month-on-month increase since February and significantly better than had been expected, with analysts only forecasting a rise of 0.4%.

"The figures provide an early indication that economic growth will remain in positive territory during the third quarter of the year," said David Kern, chief economist at the BCC.

"However, there is no room for complacency. The full impact of the emergency Budget's austerity measures is yet to take effect."