New economic data reveals that United States retail sales experienced slower-than-expected growth during September, as American consumers grappled with rising costs while businesses faced increasing operational expenses.
Economic Slowdown Amid Government Shutdown
The Commerce Department reported that overall retail sales increased by just 0.2 percent on a month-on-month basis, falling slightly below analyst expectations and showing significant cooling from August's more robust 0.6 percent increase. The publication of this crucial economic data was delayed by a record-long government shutdown that recently concluded.
When compared to the same period last year, September retail sales demonstrated 4.3 percent growth. However, economists are expressing concern that the softening trend in consumer spending is likely to continue, particularly as President Donald Trump's tariffs contribute to higher costs while the labor market shows signs of weakening.
Inflation Pressures and Consumer Response
A separate report from the Labor Department indicated that wholesale inflation accelerated in September, rising by 0.3 percent in line with forecasts. This increase was primarily driven by a substantial 0.9 percent jump in goods prices, highlighting the steeper costs that businesses across various sectors are currently facing.
Heather Long, chief economist at Navy Federal Credit Union, observed that American consumers have entered what she describes as "value-hunting mode." She explained that "They are spending more on the basics and being extra choosy with where they spend their discretionary dollars."
The data revealed notable monthly declines in several categories particularly affected by tariffs, including:
- Auto parts and motor vehicles
- Electronics and appliances
- Sporting goods and instruments
- Clothing and hobby stores
Broader Economic Implications
The economic landscape appears increasingly divided, with a growing gap emerging between higher-income households and those with lower earnings. While some retailers continue to absorb the full impact of higher tariffs to shield their customers, this strategy may prove unsustainable if cost pressures persist.
Samuel Tombs of Pantheon Macroeconomics noted that the inflation impact from tariffs remains modest for now, with underlying services inflation continuing to slow. He projected that underlying PPI inflation "should ease after producers have finished passing on tariff costs in a few months' time."
The government shutdown between October and mid-November significantly disrupted data collection efforts, resulting in the cancellation of full reports on consumer inflation and employment for October. Available numbers from that period will instead be released alongside November's figures when they become available.
