British retail sales grew at the fastest annual pace in three years in September as consumers sailed through a global credit crunch and a run on Northern Rock.
The Office for National Statistics said on Thursday that sales increased 0.6 per cent last month, well above expectations for a 0.1 per cent rise and taking the annual rate to 6.3 per cent - its strongest since September 2004.
However, the strong performance came with heavy discounting by retailers. Prices were on average 1.5 per cent lower than a year ago, the biggest fall in over two years.
With broader measures of inflation also weakening, some economists argue the door remains open for a cut in borrowing costs even as soon as November, if the Bank of England (BoE) judges it necessary.
There are also signs that the housing market and broad money supply growth are coming off the boil.
The British Bankers' Association said mortgage lending rose by £5.8 billion sterling last month, easing from a near record of £6.1 billion in August.
BoE figures showed broad money supply growth - which policymakers believe can fuel future inflation - cooled to an annual 12.8 per cent in September from 13.5 per cent.