High street store groups were told yesterday to brace themselves for bleak Christmas trading after annual retail sales growth dropped to a two-and-a-half-year low.

A danger of a retreat from the shops by consumers fearful of recession was emphasised by official figures showing that the quantity of goods sold last month dropped by 0.4 per cent.

Although the fall was less severe than expected, and came after a revised 1.1 per cent jump in August, it cut annual growth in sales volumes to 1.8 per cent, the weakest since February 2006.

Economists said that the figures signalled a continued weakening in underlying consumer demand that was certain to gather pace as Britain slid deeper into recession.

The City expressed further surprise at the relative resilience of the official high street sales figures, which remain markedly stronger than industry surveys from the CBI and British Retail Consortium (BRC), as well as the Bank of England’s intelligence on trading conditions from its regional agents.

But analysts argued that the official data still confirmed that consumer demand is crumbling and suggested that it will weaken further as Britons abandon their past high-spending habits in the face of a deepening down-turn. George Buckley, of Deutsche Bank, said: “I’m still surprised that retail sales are holding up so well, at least on the official figures. I wouldn’t be surprised to see them weaken further up to Christmas. If any sector is going to be hit hard by what’s going on in the markets and the economy, it’s going to be the UK consumer.”

The hardest-hit stores last month were retailers of clothing and household goods. The quantity of clothing sold last month was down 2.3 per cent from August, while household goods sales volumes fell by 2 per cent, in an indication of the toll from the housing market crash.

Sales of “big-ticket” electrical goods were hit particularly hard last month, the Office for National Statistics said.

The BRC said that the official figures “confirm that overall sales growth is slowing, and conditions toughening for customers and retailers as the crucial run-up to Christmas begins.

“With almost all sales growth confined to food, many nonfood retailers are under huge pressure. Not only are sales hard to come by but widepread discounting is putting margins under tremendous pressure.”

The value of food sales has been driven upwards by soaring prices, squeezing the amount of disposable income that consumers have remaining for other spending.

However, there were signs in yesterday’s figures, too, that the surging cost of food has begun to lead shoppers to cut back on the quantities they buy.

The volume of food bought in the past three months fell by 0.1 per cent compared with the same period last year, marking the sharpest such decline since the figures began to be compiled in 1986.

There were also indications that the department stores sector is feeling the squeeze as consumers curb spending on more discretionary luxury items. Sales volumes at nonspecialised retailers – mainly department stores – were 2.4 per cent lower in the past quarter than in the same period last year. Again, this was the sharpest fall on this basis seen since at least 1986.

Retailers’ hopes for a boost to sales now rest on expectations that the Bank of England will push through sharp cuts in interest rates. Economists expect that the Bank may order a further half-point rate cut next month, after this month’s emergency half-point reduction.

Love it or hate it, Mamma Mia!, the film based on Abba songs, is set to overtake the Star Wars trilogy as the biggest selling DVD on Amazon. The internet retailer said that preorders in the UK had surpassed expectations. The business expects UK sales growth this Christmas of 15 per cent, the slowest since the dot-com crash. Amazon’s parent company said on Wednesday that global revenues in the final three months of the year could be $1 million (£620,000) below previous expectations .

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