Retail sales in the UK fell 0.8% in September as consumers increasingly feel the strain of falling real wages.
The squeeze created by consumer prices (CPI) rising must faster than average annual salaries was confirmed earlier this week when CPI hit 3%, while wage growth could only muster an annual 2.2%.
So, what do economists think Thursday's disappointing drop in retail sales, taken together with the inflation and wage data mean for the UK economy? Is a consumer-led slowdown inevitable?
And, more importantly, what do they think will be the response of officials - particularly those of the Bank of England's monetary policy committee? Can the committee successfully raise UK interest rates to bring down inflation - or does this, too, risk damaging growth?
The analysts say . . .
Capital Economics - Ruth Gregory: "Although September’s retail sales figures were far weaker than expected, growth still maintained a fairly reasonable pace in Q3 as a whole.
"Admittedly, retail sales volumes dropped by a monthly 0.8% in September, well below the consensus expectation for a 0.1% fall and pulling the annual rate down from 2.3% in August to 1.2%. But the monthly figures tend to be volatile and after a big rise in the previous two months, some fall-back had always looked likely.
"Meanwhile, spending still rose by a decent 0.6% over Q3 as a whole, suggesting that sales (which account for around a third of overall spending) will provide a small 0.05 percentage point or so boost to Q3 GDP growth."
ING - James Smith: "At -0.8%, the latest month-on-month fall in retail sales suggests that things haven’t got a whole lot better for consumer spending, after what was a particularly woeful second quarter.
"As the real wage squeeze persists, shoppers appear to be remaining cautious when it comes to non-essentials. Non-food retailers - which includes department stores - saw sales drop by 1.5% in September, while internet retailers continue to dominate the high street.
"With inflation likely to stay up around 3% for the next few months and wage growth set to hover just above 2% in the medium-term, the pressure on household budgets is unlikely to dissipate for at least a couple more quarters.
"It's also true that much of the spending we've seen throughout the last year has been fuelled by surging borrowing. Whilst much of that is confined to car financing, if consumers start to take a more cautious approach to unsecured lending more generally, that would keep a lid on any recovery in retail spending.
"Fragile consumer spending is a key reason why we think the Bank of England will take a cautious approach to raising rates. While we expect the Bank to exit 'emergency mode' with a November rate rise, we are yet to be fully convinced it will quickly follow up with a second hike over coming months."
Pantheon Macroeconomics - Samuel Tombs: "Despite September’s fall, sales volumes were still up by 0.6% quarter-on-quarter in Q3. But this strong rise will provide little support to GDP growth, since most goods are imported.
"Households also likely financed the pickup in retail spending by cutting back their consumption of services; the correlation between retail sales and overall spending is surprisingly weak.
"Looking ahead, the third quarter’s momentum in retail sales likely won’t be maintained.
“Admittedly, the squeeze on real wages will ease quickly next year now that retailers have nearly finished passing higher import prices on to consumers. But growth in consumers’ spending likely will be held back by slow growth in employment, further austerity and rising borrowing costs.
"Household goods retailers also likely will struggle soon in response to the decline in housing market activity. Consumers, therefore, are not in a fit state to shake the economy out of its torpor."
The Share Centre - Helal Miah: "It was once again the non-food retailers that were impacted by shopper’s habits, but surprisingly, the clothing and footwear sales were good - possibly because we had more normal weather conditions during the month.
“While September’s fall may partly be a balancing out effect of the strong 0.9% rise in August, questions will no doubt be asked about the pressures faced by the consumer of falling real incomes.
"Inflation just hit 3%, while average wage growth is languishing at around 2%, despite record low unemployment rates. This will leave the Bank of England with a difficult decision to make.
“The imminent rise in interest rates, possibly next month, could need reassessing and delayed for a little with longer so not to derail consumer shopping habits further.
"The retail sector is a large component of the GDP numbers and Bank of England policy members will not want to risk stalling an already slowing economy."