Retailing and manufacturing activity both slowed last month to their weakest pace this year, as consumers felt the pinch of higher interest rates and the strength of sterling took its toll on exports.

Leading surveys of the high street and industry today suggested that the economy is continuing to slow gradually. But indications that pricing pressures remain strong mean that the Bank of England is unlikely to react by cutting interest rates next week, analysts said.

The CBI Distributive Trades survey showed that sales were below average in October for the third month in a row, with shoppers reluctant to splash out on autumn clothes ranges and seeking out bargain prices across the board.

Just 10 per cent more retailers said sales volumes were up than said they were down, the weakest such balance since November 2006, the survey revealed.

Paul Dales, of Capital Economics, said that the survey could imply a sharp drop in official sales growth from 6.3 per cent to around 3.5 per cent. “It may be the first sign that higher interest rates are starting to bite,” he said.

John Longworth, executive director at Asda and chairman of the CBI’s Distributive Trades Panel, said: “It is clear that the buoyant trading period enjoyed earlier this year has tailed off.

“Although slightly better sales are expected in November, retailers’ hopes have been disappointed for the past few months, and they anticipate only subdued growth in the important run-up to Christmas.”

Manufacturing had a similarly downbeat month, returning to more normal levels of activity from the surprisingly brisk pace of growth over the summer, CIPS/RBS purchasing managers’ index (PMI) suggested.

The headline index dropped to 52.9 in October, from 54.7 the previous month, on a scale where any figure above 50 indicates rising activity levels. It was the lowest reading since December 2006.

New orders rose at their slowest pace since August 2006, driven by a sharp slowdown in export orders, while employment growth also unravelled.

Geoffrey Dicks, of RBS, said exports were suffering from weaker overseas demand and the effects of a rising pound.

He said: “The PMI is still above its long-term trend but today’s survey points to a significant loss of momentum over the last two months.”

Despite the drop in activity, however, the output price balance remained high, although it fell back to 57 from a record of 57.8 in September. That suggested rising commodity prices are continuing to put pressure on costs, and that the risk of a pick-up in inflation remains.

That risk was highlighted last night by Charles Bean, the Bank of England’s chief economist, in a speech taken as suggesting that he would not support moves for a rate cut next month.

Karen Ward, of HSBC, said: “With these kinds of cost pressures, central banks can’t afford to be complacent about inflation.”

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