Annual growth in retail sales is at its lowest rate for two years.

The CBI survey shows that for the fourth consecutive month, sales were below expectations.

The three-month moving average is at its lowest rate since December 2000.

Retailer expectations have been sharply scaled back. They significantly reduced their expected sales for September. Some 38 per cent said they expected sales to rise and 28 per cent said they would go down. The balance of plus 10 per cent is the lowest expectation for a month ahead for two years.

Ian McCafferty, CBI chief economist, said: 'This survey confirms our view that the growth of consumer spending is slowing down sharply from the rapid rates seen throughout most of 2001 and early 2002. Net incomes have been growing more slowly and consumer confidence may have been knocked by uncertainty in the financial markets. Retailers now believe an upturn will not come quickly and have reduced their expectations.

'The Bank of England is right to promote long-term stability but should stand ready to cut interest rates if this stream of gloomy economic news continues.'

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