Retail sales fell 0.4 per cent last month as consumer confidence was dented by the turmoil in financial markets.

The Office for National Statistics figures continue to defy expectations, however, as the decline was better than expected by many economists.

But, the fall still left annual growth at 1.8 per cent, the lowest level since February 2006, after a revised 1.1 per cent gain in August.

Analysts had expected a monthly fall of 0.9 per cent and an annual rate of 2.0 per cent growth.

September's fall was driven by weakness in clothing and household goods sales. Textile, clothing and footwear sales fell 2.3 per cent while sales of household goods slipped 2.0 per cent on the month.

The official data has been surprisingly resilient this year given weak readings in other monthly surveys and gloomy news from retailers. The figures may indicate that official numbers are starting to catch up and reflect tougher conditions.

Deutsche Bank economist George Buckley said: "I'm still surprised retail sales are holding up so well, at least on official figures. I wouldn't be surprised to see them weaken further up to Christmas.

"If any sector is going to be hit hard from what's been going on in the markets and the economy, it's going to be the UK consumer."

The global financial crisis has driven Britain to the brink of its first recession since the early 1990s, with tighter credit, soaring living costs and rising unemployment piling the pressure on households.

Economists expect the Bank of England to repeat this month's 50-basis-point cut in borrowing costs next month and some see rates falling below 3 per cent next year from 4.5 per cent.

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