Retailers are less optimistic about the future

Sales fell for 38% of retailers taking part in the CBI Distributive Trades Survey, while 29% said sales were up on September last year.

The findings sent the CBI's retail sector index to -9 from +2 in August.

Economists said the gloomy findings may be a sign that higher interest rates are making shoppers cautious.

Gloomy mood

Consumer debt is at record levels, driven by a mix of mortgage debt, whose levels reflect the boom in UK house prices, and spending on credit cards.

UK retailers slashed the prices of summer clothing

The Bank of England has raised interest rates five times since November 2003, to 4.75%.

A separate survey by research firm GFK Martin Hamblin also registered an 18-month low in consumer confidence. Its index gave a reading of -7 in September, down 2 points from the August reading.

The CBI found confidence slipping among retailers too, with 30% of those surveyed anticipating a drop in sales, while 26% took a rosier view of future trends and predicted better sales.

Interest rates

Viewed over a three-month period, the CBI said its survey pointed to a slowdown in sales and called for a freeze on rate rises.

"The Bank of England has been successful in slowing the growth of consumer spending. It must now be careful not to overdo things. Interest rate increases should be put firmly on hold for the time being," said CBI chief economist Ian McCafferty.

Last week, the Office for National Statistics painted a more mixed picture in its August sales data. It reported that sales rose 0.6% on the month and 6.5% year-on-year as discounting pushed up sales of clothing and footwear.

Interest rate rises have had an impact on the housing market as well as the high street. The Bank of England has issued figures showing mortgage lending dropped to its lowest level for a year in August.