The pound rallied on the news hitting a two-week high against the dollar as economists said signs of strong consumer confidence were a "major boost" to the post-referendum economy.
The numbers, published by the Office for National Statistics (ONS) this morning showed retail sales jumped by 1.4 per cent in July, well ahead of expectations for just a 0.1 per cent rise.
Sterling shot up by 0.9 per cent against the dollar to stand at $1.3161 - its highest level for two weeks. Against the euro the pound was up 0.6 per cent to €1.1622.
Economists said the figures increased the UK's chances of avoiding a recession later this year, especially as it comes off the back of surprising good employment figures which hinted there had been no jump in unemployment since the Brexit vote.
John Hawskworth, chief economist at PwC said: "Together with yesterday's stronger than expected labour market figures, early indications from official data are that the initial negative economic impact of the Brexit vote may not have been as bad as more subjective indications from consumer and business confidence surveys suggested.
"It is still early days, but so far so good."
Howard Archer of IHS Global added: "July’s jump in UK retail sales is a major boost to third quarter growth prospects – and occurred despite survey evidence showing consumer sentiment slumping after the vote for Brexit".
"Consumers haven't been ruffled by the Leave vote," said Ruth Gregory of Capital Economics.
"This relative resilience in spending is not too surprising since the fundamentals - such as low interest rates, inflation and a strong jobs market - remain supportive ... today" she added.
Read more: Household incomes pass pre-crisis levels
In value terms, the amount spent in shops climbed by 3.6 per cent over the year, compared to a 5.9 per cent rise as measured by volume - a sign of price deflation that has hit retailers and helped consumers over the last 12 months.
However, Samuel Tombs of Panetheon Economics warned: "Sharp price falls have boost retail sales volumes. [The] pound's collapse points to rising prices and a sharp slowdown ahead."