British retail sales failed to grow for a second month running in September, official data showed on Thursday, confounding expectations for a 0.5 percent rise.
The Office for National Statistics said sales volumes were flat on the month, leaving them 2.4 percent higher than a year ago. That was below analysts' forecasts for an annual increase of 2.8 percent.
The figures suggest consumers remain reluctant to spend at a time when unemployment is rising and may reinforce worries over the strength of any economic recovery.
"High street sales appear not to be responding to the recent notable jump in consumer confidence, perhaps reflecting the fact that mounting job insecurity and an ongoing credit drought is offsetting the feel good factors in the form of rising asset values," said Richard McGuire at RBC Capital Markets.
For a graphic showing UK retail sales and equity performance, click here: http://graphics.thomsonreuters.com/109/UK_RTLS1009.gif
Figures on Friday are expected to show Britain's economy grew in the third quarter after more than a year of decline though some recent data has cast doubt on that.
Thursday's figures showed textile, clothing and footwear sales volumes fell 0.5 percent on the month while sales of non-specialised stores, which includes department stores, were up by 0.5 percent.
Sales of household goods rose 0.3 percent, taking the annual fall to 0.9 percent, its smallest decline since December 2008.
Separately, the Bank of England said the flow of lending to British businesses improved sharply in August but still remained negative, with major banks reporting a rise in spreads and fees on new lending.
The retail sales deflator fell to -0.5 percent in September compared with a year ago, down from -0.4 percent in August. That was the fourth consecutive month it has been negative, indicating retailers are still having to cut prices to lure in shoppers.
British billionaire Philip Green, owner of the Topshop-to-Bhs retail group Arcadia, said the stock market had rebounded too far too soon and predicted 2010 would be another difficult year for the retail sector.
Speaking to Reuters at his offices in central London, Green said any retail recovery would be slow.
"I think it's going to be hard work ahead, a long slog," he said ahead of the release of Arcadia's full-year results on Thursday. [ID:nLL234210]
Department stores group Debenhams <DEB.L> on Thursday posted a 14 percent rise in profit before tax, goodwill and one-off items to 125.2 million pounds ($207.1 million) for the year ended Aug. 29. That was at the top end of expectations.
