By Wiktor Szary and Jason Douglas

LONDON--U.K. retail sales rebounded in February, new figures showed Thursday, but the underlying picture remained weak, signaling that the British shopper remained cautious at the start of 2018 amid an ongoing consumer squeeze.

Sales grew by 0.8% on month in February--compared with a monthly decline of 0.2% in January--twice the pace seen in a Wall Street Journal survey of analysts.

With the exception of non-food stores, all retail sectors saw growth in February, the Office for National Statistics said. This, however, came after a 0.3% downward revision to January's monthly growth.

Nearly halfway through the two-year Brexit negotiations, the U.K. economy remains stuck in low gear, missing out on a global expansion which has driven strong growth among its developed peers. The U.K. posted the weakest rate of growth among the Group of Seven advanced economies in the final quarter of last year.

The prolonged consumer squeeze is largely to blame. Accelerating inflation, spurred by the pound's steep depreciation in the wake of the 2016 Brexit vote, has outpaced growth in British workers' wages for the past twelve months, dampening demand in the domestic-driven economy.

But as British officials travel to Brussels to finalize a transitional Brexit deal, which they hope will limit business uncertainty linked to the country's departure from the European Union, there are signs that the prolonged inflationary squeeze may be starting to ease.

Figures published earlier this week showed that inflation, while still significantly above the Bank of England's 2% target, slowed visibly in February, to 2.7%, from 3% the previous month.

Britain's tight labor market also fueled faster wage growth at the start of the year, loosening the squeeze on Britons' wallets.

Bank of England officials expect this trend to continue, forecasting that pay packets will grow at a faster pace over coming months, just as inflation gradually returns to target. This would give consumers--and the economy--even more breathing space.

These positive expectations were reflected in U.K. Treasury chief Philip Hammond's new forecasts earlier this month, which showed that growth in 2018 will be modestly higher than predicted late last year.

Write to Wiktor Szary at Wiktor.Szary@wsj.com and Jason Douglas at Jason.Douglas@wsj.com

(END) Dow Jones Newswires

March 22, 2018 05:55 ET (09:55 GMT)