Retail sales see three year high

UK retail sales rose by the strongest annual rate in three years in September, official figures show. The Office for National Statistics (ONS) said sales were up 6.3% from the same month a year earlier, the biggest gain since September 2004. Sales increased 0.6% from August, above analysts' expectations of a 0.1% rise. Heavy discounting by retailers spurred the increase in spending, the ONS said. Recent credit jitters fears and fears of a wider economic crisis have prompted analysts to predict that the UK would leave rates on hold at 5.75% or even reduce them, rather than continue raising them.

But these figures, along with upbeat labour market data on Wednesday, suggest that the consumer has not yet been deterred by the market turmoil.

The Bank of England's monetary policy committee (MPC) has increased UK interest rates five times since August 2006, with the last rise coming in July this year.

"September's strong rise in UK retail sales, albeit accompanied by heavy price discounting, increases the chances that the MPC will hold off a while longer before cutting interest rates," said Vicky Redwood at Capital Economics.

"These data confirm other evidence that the economy grew more strongly in Q3 than the MPC expected. Along with the MPC's lingering concerns, this points to rates staying on hold until next year."