Confident shoppers push High Street sales up 6.3%

High street sales remained buoyant last month as shoppers continued to shrug off fears of an economic downturn, official figures showed yesterday.

High street sales remained buoyant last month as shoppers continued to shrug off fears of an economic downturn, official figures showed yesterday. Retail sales volumes rose 0.5 per cent in August to stand 6.3 per cent higher on the year, the strongest annual rise since May.

This was higher than had been forecast by City economists and came a day after fears of a rise in the number out of work proved unfounded. Ciaran Barr, of Deutsche Bank, said: "The strength of the consumer economy has not yet dissipated – hardly surprising given low unemployment and a strong housing market."

Analysts said normally the strength of consumer demand would have argued against a further cut in rates but admitted that the outlook was impossible to read following this week's US terrorist attacks. Danny Gabay, UK economist at investment bank JP Morgan, said: "Not to put too fine a point on it, the future changed on Tuesday."

There are growing concerns that the terrorist attacks in the US could hit US consumer confidence, with spillover effects in Europe. September's UK retail sales data, published on 18 October, will be closely studied. However, economists believe data such as retail sales and unemployment will be vital in divining the direction of the underlying UK economy once the impact of the US crisis becomes clearer.

The breakdown of yesterday's figures showed the rise in retail sales was driven by strong growth in household goods, clothing and footwear.

Daniel Kaye, UK economist at Capital Economics, said: "If consumers are still making big-ticket or luxury purchases, it suggests that they have not been panicked by the talk of a slump in global activity." Small-ticket items such as textiles, clothing and footwear also continued to fare well, with volumes rising 0.7 per cent on the month and 10.7 per cent on the year.

Meanwhile, economic growth in the eurozone ground to a near halt in the second quarter, data showed yesterday. Economists said the attacks in the US had dented hopes for recovery later in the year. The European Union's statistical office, Eurostat, said GDP in the 12-nation single currency area rose a meagre 0.1 per cent from the previous quarter and 1.7 per cent from a year earlier.

The figures, which were in line with economists' forecasts, showed only services grew in the second quarter, with agriculture, industry and construction all shrinking.

In the US, the number seeking first-time jobless benefits last week rose well above expectations, a government report showed yesterday. Economists said this signalled further weakness in the US labour market as the economy struggled to stay above water. The number of initial jobless claims rose by 21,000 to 431,000 for the week ended 8 September. That was significantly higher than the 404,000 claims analysts had forecast.