The car industry suffered its worst sales performance for six years as the retail sector struggled in October, according to a new report from the Confederation of British Industry.

But the volume of retail sales fell more slowly than either retailers or economists had forecast, the CBI said in its monthly distributive trades survey.

Some 42% of retailers said their sales were down on the same time last year, while only 24% said they were up. The negative balance of 18% was better than expected but followed the weakest sales ever recorded during the survey's 22-year history last month, which showed a negative balance of 24%.

For the fifth month running, retail sales volumes were well down on a year ago. Retailers are, however, hoping the worst is behind them and expect the rate of decline to slow in the run up to the Christmas period, the CBI said.

"October was yet another tough month for retailers who have seen no let up since June," said John Longworth, the executive director at the supermarket chain Asda and chairman of the CBI's survey panel. "People are clearly holding back from spending on big ticket items such as cars."

The CBI said the motor trade suffered its worst sales performance since December 1999 as traders reported a balance of minus 62%. This points to a significant year-on-year trading decline and a similar decline is foreseen for November, the CBI said. The sector has grown since September 2004.

Meanwhile, durable household goods recorded their weakest sales on record, chiming in with a reported drop in confidence yesterday.

A report from the consultancy Gfk NOP yesterday said consumer confidence plunged in October to its weakest level since the start of the 2003 Iraq war. But analysts said today's CBI survey, which was better than expected, will further reduce the rapidly diminishing prospects of another interest rate cut this year.

"Following on from the hard data showing a pick-up in retail sales in September, the CBI survey will, temporarily at least, alleviate some of the concern about the weakness of consumer spending," said Howard Archer of Global Insight.

In other news that will take the pressure off the Bank of England to reduce borrowing costs this year, the Nationwide building society reported a rebound in house prices in October. Nationwide said the average value of UK homes rose by 1.3% over the month.

The increase reversed the falls recorded by the society in August and September, bringing the average price in the UK to £157,107.