Retail sales rose at their weakest pace for nine months in August, a report showed yesterday, as clothing stores bore the brunt of shoppers’ reluctance to spend.

The CBI said that 15 per cent more retailers reported rising volumes of sales in August than a fall, compared with a positive balance of 18 per cent the previous month. The figure was the lowest since last November.

In an encouraging sign for the Bank of England, retailers reined back their prices. The reported prices balance dropped back to plus 16 from plus 33 three months ago, and was just plus 12 when retailers were asked what they expected prices to be in a month’s time. That figure was the lowest in a year.

The business group’s figures chimed with official data, released this month, which showed that sales volumes rose in July only because of a massive round of price-cutting on the high street.

The CBI said that its three-month moving average of sales volumes had slowed continuously since a peak in May.

Ian McCafferty, the CBI’s chief economic adviser, said: “This more moderate growth is expected to continue, and retailers are less inclined to put up prices, which should help to alleviate pressure to move interest rates up again.

“The Harry Potter effect seems to have helped lift sales for booksellers, but the damp and disappointing summer has not done clothes shops any favours.”

The balance for clothing stores sank to minus 37 in August, compared with minus 3 in July and minus 52 in June.

In a positive signal, however, the gauge of investment intentions rose to a two-year high.

James Knightley, of ING Financial Markets, said: “This is the weakest headline figure since November, but retailers remain upbeat with a net 17 per cent expecting sales to pick up again in September. With the housing market data showing only tentative signs of responding to tighter monetary conditions, there is still a case for a further rate rise,” he said.

Alan Castle, of Lehman Brothers, said that there was no clear pattern emerging across the different retailing sectors, as furniture and carpet sales were strong while sales of household goods were weak.

DSG woe

DSG International, the owner of Currys and PC World, said that margins fell this summer after a lacklustre response to Microsoft’s new operating system, Vista, forced it to discount laptop computers. Shares fell 2.5p to 154.8p as DSG said that like-for-like gross margins fell 0.6 per cent in the 16 weeks to August 18. Underlying sales rose 6 per cent as poor weather in Britain and the Nordic countries boosted sales of home electricals.

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