More evidence that the economy is slowing emerged yesterday in a report from the National Institute of Economic and Social Research that said UK gross domestic product grew by 0.7% in the three months to end-October.

More evidence that the economy is slowing emerged yesterday in a report from the National Institute of Economic and Social Research that said UK gross domestic product grew by 0.7% in the three months to end-October, decelerating from growth of 0.8% in the three months to end-September.

"The September industrial production figures show slightly weaker manufacturing output and this depresses our estimate of the rolling three-month growth rate," the NIESR said.

The think-tank said the economic impact of the recent credit crisis was difficult to assess but it reckoned growth was likely to slow as we head towards the end of the year.

"We do expect to see slower growth in the economy as a whole in the periods ending in November and December."

Data from the Office for National Statistics showed the UK economy grew by 0.8% quarter-on-quarter in the August-to-September period, notching up growth above its long-term average for a seventh consecutive quarter.

The latest snapshot of the health of the economy was released at the same as new data showed UK retail sales growth slowed to its weakest pace in nearly a year in October, suggesting that fragile consumer confidence and higher interest rates are biting in the run-up to Christmas.

The British Retail Consortium said like-for-like sales grew just 1% on the year in October, down from 3% in September and the slowest since November last year.

Total sales - which includes new floorspace - grew 3% on the year, down from the 4.9% recorded in September.

City economists said the figures would boost speculation that base rates will have to come down from 5.75% sooner rather than later as the economy shows signs of softening, although a rate cut this week is still seen as unlikely.

The Bank of England is expected to keep the cost of borrowing steady when its Monetary Policy Committee announces a decision on rates tomorrow.

On a more positive note, new car registrations rose in October at the fastest annual rate for almost two years, suggesting the credit squeeze and higher interest rates have not put consumers off big purchases. The Society of Motor Manufacturers and Traders said new car registrations rose 8.4% year-on-year in October to 166,797. This was the quickest pace of growth since December 2005 and up from a 1.3% rise in September.

The strong performance surprised economists who have been expecting consumers' spending power to fall after five interest rate rises since last August, and given uncertainty over the global economic outlook.

"We continue to expect a sharp slowdown in retail sales growth, but the report suggests that other components of spending could provide some offset for broader consumption growth," said Peter Newland, an economist at Lehman Brothers.

Private car registrations rose 5.6% on the year to 67,720 last month, the SMMT said. Fleet registrations were 9.1% higher at 88,888 and business car registrations were 23.5% higher at 10,189.