British retail sales partially recovered in August after a rainy July washout, official figures showed on Friday, adding to signs that the country's consumers were mostly coping with the cost-of-living squeeze.

Sales volumes rose by 0.4% on a month-on-month basis after a sharp 1.1% fall in July, the Office for National Statistics said. Economists polled by Reuters had forecast a slightly stronger 0.5% rise in August.

While sales overall remained subdued, the partial recovery was driven by food sales and a strong month for clothing, Heather Bovill, deputy director for surveys and economic indicators at the Office for National Statistics (ONS), said.

"These were partially offset by internet sales, which dropped slightly as some people returned to shopping in person following a very wet July. Fuel sales also fell, with increased prices hitting demand," she said.

Britain's inflation rate stood at 6.7% last month, down from a peak of over 11% last October but still the highest among the world's large rich economies.

However, August's data represented the sixth time so far in 2023 that sales volumes rose on a month-to-month basis, suggesting resilience in consumer demand.

Earlier on Friday, market research firm GfK said its measure of consumer confidence was the highest since January last year.

But the impact of the steady rise in interest rates by the Bank of England since December 2021 has probably yet to be fully felt and could hurt consumer spending later in 2023.

The BoE on Thursday halted its run of increases in borrowing costs, saying it saw signs of a slowdown in the economy.

Retail sales volumes were 1.4% lower than a year earlier, the ONS said, compared with economists' forecasts for a 1.2% decline. That was the smallest such fall since March 2022.

Recent updates from big British retailers have mostly been positive. Last week Primark owner Associated British Foods raised its profit outlook, and on Thursday clothing chain Next did the same.

Next cautioned that a softening in the labour market could dent consumer demand in 2024.

(Reporting by William Schomberg; additional reporting by James Davey; editing by William James and Christina Fincher)