Shoppers prove resilient to credit crunch

The credit crunch has so far failed to dent shoppers' appetites as big discounts helped retail sales grow more strongly than expected for a third month running, it emerged yesterday.

Total sales increased 0.6 per cent in September, official figures showed – easily beating forecasts of a 0.1 per cent rise. The annual growth rate surged to a three-year high of 6.3 per cent. Sales were boosted by strong demand for toys and games, while food sales grew at their strongest rate in more than a year.

The less-volatile three-month sales volume figure for July to September increased by 1.7 per cent over the preceding three months, driven by predominantly non-food stores, where sales were up 2.3 per cent.

But spending was fuelled by special offers in stores. The Office of National Statistics said prices fell at the sharpest rate year-on-year since January 2005, raising concerns that retailers were less confident about shoppers' willingness to consume.

Howard Archer, chief UK economist at Global Insight, said: "We suspect that spending will soften significantly over the coming months as consumers are increasingly pressurised by the marked overall rise in interest rates since August 2006, muted real disposable income growth, increased debt levels and a slowing housing market."