UK September retail sales fall more than expected, October consumer confidence drops sharply.

UK September retail sales fell as consumers cut back on food purchases, while above-average temperatures hit demand for autumn clothing. The Office for National Statistics (ONS) reported on Friday that the total volume of goods sold online and in stores fell 0.4%, whereas economists had expected a 0.1% decline. This followed an upwardly revised 0.7% increase in August. Overall sales grew 0.7% in the third quarter, contributing 0.03 percentage points to overall economic growth. UK consumers, who account for about 60% of UK economic activity, had previously weathered the "Iran shock" better than expectedsummer spending was boosted by political optimism and the World Cup football tournament. However, a survey earlier on Friday showed consumer confidence fell sharply this month, further indicating that they have begun to feel the strain. The decline came after diesel prices hit a record 2 per litre and mortgage rates approached 6%. At the same time, Britons are preparing for a jump in energy bills at the start of the new yearan increase expected to push inflation above 4% and force the Bank of England to raise interest rates as early as November. Chancellor John Healey has said he plans to announce a new round of cost-of-living support measures in next week's Budget; but given the state of the public finances, he has limited room for large-scale giveaways.