LONDON (Reuters) – British retail sales stalled in August, confounding expectations of a small rise as clothing sales exerted the biggest downward impact, official data showed yesterday.

Analysts had predicted a 0.1 percent rise on the month and the Office for National Statistics said August's unchanged reading took the annual rate of growth in retail sales volumes down to 2.1 percent from 2.9 percent in July.

In addition, July's previously reported monthly gain of 0.4 percent was revised down to a rise of 0.2 percent.

"Given the resilience of the retail sector, August's weaker outturn may just be a blip," said Vicky Redwood of Capital Economics. "But even if that proves to be the case, we still think that a weakening labour market and looming fiscal consolidation will prompt sales growth to slow eventually."

The pound fell nearly half a cent against the dollar, as the figures reinforced expectations the Bank of England will keep policy ultra-loose for some time.