Market signals work. That’s the message from the latest retail sales figures, which provide a textbook example of the price mechanism in action.

The headline number from the Office for National Statistics was that the volume of goods sold in shops and online was up 0.8% between September and October. That took the annual growth rate to 4.3%.

But there is a reason activity looks so strong and that is that retailers are cutting prices to drum up business. The ONS data showed that average store prices were 1.5% lower this October than they were in October 2013. Moreover, disinflationary pressures are getting stronger with prices excluding food falling at an annual rate of 1.2% in October as against 0.9% in September.

There were annual price falls in every category of spending: supermarkets, petrol stations, department stores, clothing and footwear outlets, household goods and internet sales: the first time this has happened in more than a decade.

It’s easy to explain why there were plenty of bargains to be had. September had been a tough month for retailers, who met stiff resistance from consumers when they tried to jack up prices following the summer sales. The easiest way to shift stock was to cut prices – and that is precisely what happened. Sales volumes fell by 0.3% in September but bounced back by more than the City had been expecting in October.

This trend is likely to continue. The protracted squeeze on real incomes means many consumers are not exactly flush with cash, and even those that are know that they only have to sit tight for a couple of months for retailers to panic. Profit margins are being squeezed and this will be reflected in trading statements over the coming months. In the battle of the high street there is only one winner.