Rate rises leave shoppers unfazed

Britain's shoppers have been unfazed by the Bank of England's five interest rate increases as retail sales last month grew at the fastest pace since January.

The Office for National Statistics said retail sales volumes grew by 1.0% in September, five times faster than the rate expected by the markets.

John Butler, an economist at HSBC, said: "Contrary to popular belief the UK consumer is still willing to spend. This number should remind the markets that the Bank might still have more work to do."

Sales of clothing and footwear continued their strong growth from the previous month. Strong competitive pressures meant that discounting intensified further.

The so-called deflator - a measure of what is happening to prices in the high street - fell to -1.6%, the lowest level since December 2002. Stripping out food, deflation is more pronounced, with prices down by about 3% over the past year.

Economists pointed to this discounting as an important driver of buoyant sales growth. Although sales volume was strong, cash spend dropped.

"For the moment the monetary policy committee's focus should be on the deceleration in the cash spend, not on volume numbers that are flattered by falling prices," said Geoffrey Dicks, of the Royal Bank of Scotland.

Simon Rubinsohn, of stockbroker Gerrard, said: "The increase in average earnings and the strong labour market is continuing to underpin consumer purchasing power in the face of the increasingly negative news flow emanating from the property market."

The strength of the official data runs contrary to recent data, which points to a slowdown in retail sales.