The value of goods sold on the high street surged at an annual rate of 3.8 per cent last month, fuelling hopes that spending in the run-up to Christmas could help to drag the economy out of recession.

The rise in like-for-like sales is the biggest in October in seven years and is up from a 2.8 per cent increase in September, figures from the British Retail Consortium (BRC) showed. Overall sales values also rose at the fastest pace since April as shops started to slug it out for Christmas custom by introducing promotions and discounts.

A poll conducted by Populus for The Times, published today, also shows a partial recovery in confidence about the economic outlook next year.

However, the BRC said that its figures were flattered slightly. Stephen Robertson, its director-general, said: “These are encouraging results, but they are compared to dreadful figures last year when the final three months were all negative. With less than 50 days to go before Christmas, retailers will be hoping improved consumer confidence will be sustained during the festive period and beyond.”

Analysts expect that retail sales will also be boosted over the coming months as consumers take advantage of the lower 15 per cent rate of VAT, which will rise again at the beginning of January.

The figures, which were better than expected, came as Link, the operator of the UK’s cash machine network, reported that consumers had withdrawn record sums last month. More than £10 billion was taken from ATMs, up 4.4 per cent from October last year and more than in December last year — normally the busiest month for cash withdrawals.

Edwin Schooling Latter, managing director of Link, said: “This could be a sign of consumers’ willingness to spend returning, though may also reflect some cardholders preferring to use cash to help with their budgeting.” Retailers said that the school half-term holiday and Hallowe’en had helped to drive sales of childrenswear, including fancy dress, in October. Sales of winter ranges of clothes such as coats and fleeces were hit by the mild weather.

Improvements in the housing market helped to boost sales of furniture and flooring, while the digital switchover in the North West led to a pick-up of sales of televisions in the region, the BRC said.

Hallowe’en-related food, such as pumpkins, sold well, although overall food sales rose at the slowest pace since March last year.

Online, mail-order and telephone sales, which account for 4 per cent of all retail sales, rose at an annual rate of 18 per cent for the third-biggest increase this year, suggesting that the strike by postal workers had failed to significantly dent consumer demand for non-store goods.

Despite the encouraging figures, the BRC remained cautious about the outlook for next year.

Helen Dickinson, head of retail at KPMG, which produces the BRC’s monthly sales figures, said: “The longer-term outlook remains considerably more challenging, given the economic backdrop, levels of unemployment, uncertainty regarding the impending VAT rise and the impact of future fiscal policy following next year’s election.”

• Cutting public spending could cost hundreds of thousands of jobs and undermine the country’s chances of staying out of recession, according to the TUC. In a leaflet published a day before official figures are expected to show another rise in unemployment, it emphasised that a strong public sector was crucial to economic recovery.

Autumn boost for agents

More properties coming on to the market did not stop house prices rising in October, according to the Royal Institution of Chartered Surveyors (Rebecca O’Connor writes).

The institution’s figures showed an increase from 21 per cent to 34 per cent in the number of surveyors reporting a price rise rather than fall last month — the third positive month in a row.

London led the way, where the percentage of surveyors reporting price rises was at a 13-year high of 95 per cent. The proportion of surveyors with more new instructions was 15 per cent, against September’s 5 per cent.

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