Mobile phones boost retail sales

Mobiles were just one factor driving High Street sales

Retail sales picked up strongly in September, posting their biggest rise since January this year.

UK shop sales rose 1% in September to stand 6.9% higher than a year ago, the Office for National Statistics said.

Sales were driven by surprisingly strong sales of mobile phones, carpets and sportswear.

The data could challenge rising hopes that the Bank of England has stopped raising interest rates in the current economic cycle.

Recovery?

Earlier this month, the Bank left rates on hold at 4.75%.

There is clearly some life left in the consumer Philip Shaw, Investec

Minutes of the meeting, released on Wednesday, showed that its rate setters were worried that the economy was seeing slower-than-expected growth.

An increase in interest rates was not even discussed, notes of the meeting showed.

Sales had fallen earlier in the year, with analysts citing concern about high interest rates as a factor in the decline.

However, September's rise in high street sales - the second monthly increase in a row - was five times higher than expected.

"There is clearly some life left in the consumer," said Philip Shaw, chief economist at Investec.

"We can't believe that the BoE going to raise interest rates again this year, given the signs of weakness in the global economy and the housing market. But we continue to suspect there may be one more tightening early next year."

Low prices

But there is little sign that retailers are using rising demand on the High Street as an incentive to put up prices.

The ONS retail sales deflator, which measures prices on the High Street, fell to minus 1.6%, its lowest level since December 2002.

Despite the strong performance in September, the ONS said that sales had actually fallen over the past three months.

The three-month rate fell to 1.1% from 1.5% in the April-June period, partly because of lower sales in July.

"The slowdown in the underlying growth rate of retail sales continued in the period July to September," the ONS said.