Data from the Office for National Statistics (ONS) suggested the mild March weather helped tempt consumers back into the shops, with retail sales up a seasonally adjusted 0.4 per cent over the month.
The timing of Easter - which fell earlier this year than in 1998 - could have distorted the figures, analysts warned. But even after allowing for these uncertainties, the underlying trend in retail sales was firmer.
Dharshini David, economist at HSBC investment bank, said: "There is little doubt that the sharp fall in base rates - which has already pushed up consumer confidence - is beginning to show up in the hard data."
Sales of both clothes and household goods were sharply higher. According to ONS figures, clothing and footwear sales, measured in volume terms, were up 0.5 per cent last month and have risen by 2.1 per cent over the first quarter.
Sales of household goods were up 0.3 per cent over the month and 3.7 per cent over the quarter. However, recent retail price data suggests this growth in volumes has come at the expense of margins.
Separate data provided by the Credit Card Research Group (CCRG) for March also indicated improved high street trading.
Debit card spending was up 19.2 per cent compared to a year ago, the CCRG said, while credit card spending was almost 15 per cent higher.
London stocks rose sharply amid the growing confidence in the economic outlook. The FTSE 100 index closed up 102.6 points at 6,413.6, with new share price records on Wall Street also helping sentiment.
On the currency markets, the pound jumped to a new record close of 65.76 pence against the euro.
Meanwhile, figures provided by UK banks and building societies revealed there was a surge in mortgage lending last month. The Building Societies Association said lending figures were at their highest since last summer, with gross building society advances up to pounds 2.3bn in March from pounds 1.3bn in February.
A sharp rise in mortgage loans also contributed to healthy bank lending figures, according to the British Bankers' Association (BBA). Bank lending to the M4 private sector rose by pounds 4.1bn in March, the BBA said, markedly up from February and well above the recent monthly average.
Separate Bank of England figures showed that the growth rate of M4 - a broad measure of money supply - was a subdued 0.4 per cent in March.