Retail sales fell by 0.4 per cent between August and September, the first month-on-month fall since January, prompting suggestions that the Bank of England's interest rate increase in early August may have started to damp down the consumer economy faster than expected.

This impression was confirmed by a dip in mortgage lending. The gross total lent to home-buyers last month dropped to #29.5 billion from the all-time record of #33 billion touched in August. But it was still a record amount for any September.

The Building Societies Association also said mortgages approved, but not paid out, by societies last month were also a record for September.

"While not too much should be read into one month's data, the slowdown in mortgage lending in September could be an early sign that higher interest rates and robust house price increases are adding to affordability problems and beginning to squeeze buyers out of the market," said Howard Archer, an economist at Global Insight.

He noted, too, that credit card holders paid back more than they borrowed for a second month. Mr Archer suggested some unsecured borrowers may be switching their debts into mortgages to lower their monthly payments.

National Statistics said last month's retail sales were only 3.2 per cent higher than in September last year.

Household goods were down by 2.3 per cent and non-store retailing, including internet shopping, 4.7 per cent lower, were hardest hit – after a buoyant August for both categories.

Food sales continued to gain ground, up 0.8 per cent on the month and 3.2 per cent ahead of September last year.

On the stock market, Government stocks moved higher – and the yields on them lower –indicating more restrained expectations for interest rates.

"The fall in retail sales in September was too little, too late, as far as a November rate hike is concerned. But it may go some way to reversing expectations that rates are set to rise further after November," commented Paul Dales at Capital Economics.

John Butler, an HSBC economist, agreed: "We would still say a quarter-point hike in November is likely, but it is not a foregone conclusion and the run of data from here until the meeting will be crucial.

"Our view is that the consumer is more vulnerable than many assume, given the level of household debt, rising cost of servicing that debt and the squeeze in household spending power."

Against that, the Bank will have to take into account a 0.6 per cent year-on-year increase in retail prices last month, their first such gain since January, 2002, and the sharpest rise since June, 2001.

"It is tempting to read the fall in volumes as the first sign of the August rate hike feeding through," said Geoffrey Dicks, an economist at RBS. "That is probably a mistake – the real culprit is extra high street inflation squeezing volumes."

Another unsettling factor is that the M4 money supply grew by 1.8 per cent in September and by 14.5 per cent year on year – a 16-year high.