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UK retail sales climbed at their highest annual rate in three years in September, according to official figures.

The data released by the Office for National Statistics (ONS) appears to indicate that the current turmoil on the financial markets has not deterred shoppers from parting with their cash.

According to the figures the level of high street purchases jumped by 6.3 per cent in the year to September, the strongest rise reported since the same month of 2004.

On a monthly basis sales increased by 0.6 per cent, significantly higher than the 0.1 per cent rise some analysts had predicted.

The increase, partly down to strong toy and games sales, is likely to cast doubts on speculation that the Bank of England will trim interest rates in November, in a bid to
prevent a global credit crunch from harming the wider economy.

However analysts have pointed out that the apparent resilience of consumers appears to have been driven by sharp discounting, with official data indicating that prices are falling at the sharpest rate year-on-year since January 2005.

While the rise in retail sales may deter the Bank of England from opting for a rate-cut in the near term, economists say consumer spending is likely to slowdown in the coming months amid higher borrowing costs.

"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," explained Global Insight chief economist Howard Archer.

"Furthermore, increasing concerns about the economic outlook may well further encourage consumers to tighten their belts," he added.

Some economists now believe that the Bank of England will opt to keep the UK's benchmark interest rate on hold at 5.75 per cent in November, with a cut now anticipated at the beginning of next year.