Brexit latest: Retail sales miss expectations in September

Growth was flat in September, following zero growth in August

Retail sales in Q3 were the strongest since 2014 (Getty)

Retail sales were flat in September, undershooting economists' expectations.

But official statisticians said there was no sign yet of the post-Brexit vote confidence of shoppers dwindling.

In its latest release the Office for National Statistics says that there was zero growth in sales volumes in September.

City of London analysts had pencilled in a 0.4 per cent expansion.

However, August's 0.2 per cent fall in volumes was revised up to 0 per cent – and thanks to a 2 per cent surge in July the third quarter overall was the strongest since 2014.

"The underlying trend is one of strength, suggesting consumer confidence has remained steady since June's referendum," Kate Davies from the ONS said.

The biggest monthly falls in sales were for clothing and footwear, which the ONS attributed to higher prices and an unusually warm September.

Nevertheless, economists predicted weakness ahead for the high street.

"We very much doubt that this strength will last in the face of softer employment and wage growth and higher inflation," said Ruth Gregory of Capital Economics.

"With inflation starting to respond to higher import costs relating to sterling’s weakness, we are going to see household spending power being eroded. We also suspect that employment growth will slow markedly, meaning that consumer spending is likely to soften quite substantially next year," said James Knightley of ING.

The ONS reported this week that inflation jumped to 1 per cent in September and economists expect the 18 per cent slump in the value of sterling versus the dollar since the referendum will feed through into higher shop prices soon.

The latest retail sales report showed that retail prices are still in deflation, with prices down 1.1 per cent year on year (including fuel), but the pace of decline is dropping, hinting at growing price pressures.

The Bank of England expects inflation to go higher than its 2 per cent target by the end of next year and many analysts think it could happen considerably sooner.

The jobless rate was flat at 4.9 per cent in the three months to August, but the pace of employment growth slowed.

The latest household finance index from IHS Markit released this week showed the first noticeable fall in households' current finances in October since the 23 June referendum.

Retail sales are considered a bellwether for the wider economy.

Household consumption accounts for around 60 per cent of GDP and retail sales, in turn, account for 30 per cent of household consumption.

Most economists think the economy continued to grow in the third quarter of the year, although by less than the 0.7 per cent expansion in the second quarter.