Retail sales hit their highest level in more than three years last month, driven by purchases of gold and smartphones.

Sales rose by 0.5 per cent between August and September, after a 0.7 per cent increase the previous month. The performance was better than the 0.2 per cent contraction forecast by City economists, who had expected colder weather to keep shoppers away from the high street. August’s figure was also revised up from an initial estimate of 0.5 per cent.

On an annual measure, retail sales are 1.7 per cent higher than at the same point last year and grew by 0.9 per cent in the three months to September. The expansion means that retail sales have grown for four consecutive months and are at the highest level in more than three years.

The Office for National Statistics (ONS) said online sales at non-retail stores jumped by 3.8 per cent in the third quarter and 1.5 per cent on the month, reflecting a rise in people buying gold from online jewellers. Gold prices have surged to fresh records in the last two months with analysts speculating that retail investors are buying into the precious metal alongside large institutions like central banks. Sales of computers and telecoms also rose when Apple’s new iPhone was released, the ONS said.

Retail sales are an important indicator of consumer sentiment and provide an early look at the state of the economy based on spending patterns. A separate measure of consumer confidence rose two points this month, according to GfK’s monthly survey of households.

“Retail sales rose quite strongly in the latest quarter and were at their highest level since summer 2022,” Hannah Finselbach, senior statistician at the ONS, said.

“Although food stores saw very little growth, good weather in July and August boosted sales of clothing, while online retailing also did well. Retail sales also grew over the month of September, with tech stores seeing a notable rise in sales, while online jewellers reported strong demand for gold.”

Households have yet to show signs of pre-budget worries ahead of next month’s statement, when the government is likely to announce tax rises. Economists have said Labour’s messaging around the public finances risks hitting consumer and business sentiment, leading to pull backs in spending and investment.

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“September’s data continues the trend of consumer spending holding up robustly despite the barrage of headwinds over the course of the year so far. We think the surprise rise in sales volumes is genuine rather than erratic,” Elliott Jordan-Doak, an economist at Pantheon Macroeconomics, said.

The retail sales figures are the latest in a slew of good economic news for the government, after inflation stabilised at 3.8 per cent in September, rather than rising to 4 per cent, and wage growth — an indicator of price pressures — eased off. The data has led traders to bet on one more interest rate cut from the Bank of England before the end of the year, taking the base rate to 3.75 per cent.

Jacqui Baker, head of retail at RSM, a professional services firm, said there was still “every possibility constant speculation could suppress consumer confidence in the lead up the budget. Households could be tempted to put the brakes on spending, so retailers may be entering a more challenging period during what should be their busiest time of the year.”