LONDON (AP) - Retail sales pushed higher than forecast for the second consecutive month and mortgage lending rose in July, boosting confidence that Britain is pulling out of its worst recession in decades.

But government borrowing figures for the same month were far worse than expected, underlining the task ahead for the government as tax revenues fall because of the downturn.

Retail sales rose 0.4 percent in July as a recovery in the housing market drove demand for furniture and electrical items, taking the annual growth rate to 3.3 percent - its highest level in 14 months.

The Office for National Statistics also revised up June's strong 1.2 percent monthly rise, boosted by demand for summer clothes and outdoor products thanks to warm weather, to 1.3 percent.

The July sales, beating forecasts of a smaller 0.2 percent lift, were underpinned by a 4.5 percent rise in household goods store sales, the highest rise since August 2006.

The returning confidence in the housing market was underscored by a separate report from the Council of Mortgage Lenders showing that mortgage lending jumped by 26 percent during July.

"The gains in retail sales give us greater confidence that gross domestic product will rise in the third quarter, meaning that the UK exits recession," said ING bank economist James Knightley.

A gain in third-quarter gross domestic product would follow a 0.8 percent contraction in the second quarter of the year and a 2.4 percent fall in the first quarter.

The size of the second-quarter slide in GDP surprised economists who had forecast a smaller 0.3 percent contraction after earlier signs of improvement in the economy, and many analysts are still stressing caution.

Capital Economics economist Vicky Redwood warned that an expected rise in unemployment and the end of a temporary cut in the level of sales tax at the end of the year would have a negative impact on retail sales going ahead.

Similarly, Council of Mortgage Lending economist Paul Samter said that bounce-back in housing market activity from extreme lows is limited, and that he expects a slowdown in both lending volumes and property transactions during the latter part of the year.

Treasury chief Alistair Darling said he expects Britain to return to growth at the end of the year.

Mr. Darling said that recent statistics showing a recovery in Japan, France, Germany, and Hong Kong was encouraging, given that those countries - along with Britain - had all carried out substantial and coordinated monetary policy action to stimulate their economies at the end of last year.

"I think that's encouraging, although I do think you need to be cautious about this because this is the first cut of the figures and there's still a lot of uncertainty out there," Mr. Darling told BBC radio. He added that recovery in Germany and France was particularly important for Britain, given half its trade is within the European Union.

The impact of the recession on Britain was underscored by the revelation that government borrowing rocketed in July to its highest level since records began in 1993 as tax revenue fell and the cost of unemployment benefits surged.

The Statistics Office said that Britain had an £8 billion budget deficit in the month, compared with a surplus of £5.2 billion a year earlier. July is usually a surplus month for borrowing because it usually receives a boost from quarterly tax payments.

Economists said that the monthly result made it very likely that borrowing will overshoot Mr. Darling's full-year forecast of £175 billion.

Mr. Darling said that an economic recovery was dependent on Britain sticking to its expansionary policies, which has seen interest rates fall to a record 0.5 percent low, million of pounds injected into the economy by the Bank of England, and higher government fiscal spending.

"Taking money out of the economy now, in my view, would be disastrous," he said.