U.S. retail sales rose by 0.2% in September 2025, falling short of the 0.4% growth economists had forecast and following a 0.6% increase in August. This slowdown reflects a period of more cautious consumer spending after strong gains during the summer months.
Details on Retail Sales Data
The 0.2% increase is the smallest monthly gain in four months, coming after a period of robust spending earlier in the year.
When excluding categories such as automobiles and gasoline, retail sales edged up only 0.1%.
The government’s data release was delayed due to a 43-day shutdown, adding context to the timing and analysis of the report.
Reasons for the Shortfall
Higher-income households continued to spend, but many lower- and middle-income consumers reported financial strain from rising expenses, including those associated with tariffs and inflation.
Certain retail categories saw notable declines: sporting goods, apparel, and electronics all posted lower sales in September.
Wage growth slowed year-over-year, barely staying ahead of inflation, which likely restrained discretionary spending among many Americans.
Broader Economic Implications
Consumer sentiment appeared to weaken, with the labor market showing signs of softness such as a rising unemployment rate, despite a rebound in job creation for the month.
The data is especially significant heading into the winter holiday shopping season, which is crucial for retail businesses and overall economic growth.
Analysts believe that moderate sales and higher business costs could influence upcoming Federal Reserve decisions on interest rates, as markets now anticipate more potential for a rate cut in December.
Overall, while retail demand remains positive, the lower-than-expected growth in September signals increasing caution among consumers, particularly those more heavily affected by inflation and job market uncertainties.
U.S. retail sales rose by 0.2% in September 2025, falling short of the 0.4% growth economists had forecast and following a 0.6% increase in August. This slowdown reflects a period of more cautious consumer spending after strong gains during the summer months.
Details on Retail Sales Data
The 0.2% increase is the smallest monthly gain in four months, coming after a period of robust spending earlier in the year.
When excluding categories such as automobiles and gasoline, retail sales edged up only 0.1%.
The government’s data release was delayed due to a 43-day shutdown, adding context to the timing and analysis of the report.
Reasons for the Shortfall
Higher-income households continued to spend, but many lower- and middle-income consumers reported financial strain from rising expenses, including those associated with tariffs and inflation.
Certain retail categories saw notable declines: sporting goods, apparel, and electronics all posted lower sales in September.
Wage growth slowed year-over-year, barely staying ahead of inflation, which likely restrained discretionary spending among many Americans.
Broader Economic Implications
Consumer sentiment appeared to weaken, with the labor market showing signs of softness such as a rising unemployment rate, despite a rebound in job creation for the month.
The data is especially significant heading into the winter holiday shopping season, which is crucial for retail businesses and overall economic growth.
Analysts believe that moderate sales and higher business costs could influence upcoming Federal Reserve decisions on interest rates, as markets now anticipate more potential for a rate cut in December.
Overall, while retail demand remains positive, the lower-than-expected growth in September signals increasing caution among consumers, particularly those more heavily affected by inflation and job market uncertainties.
How will the September retail slowdown affect Q4 GDP forecasts
The September retail slowdown is expected to result in more conservative Q4 GDP forecasts, with many economists slightly lowering their projections for U.S. growth in the final quarter of 2025. The softer pace of consumer spending, which accounts for a major share of GDP, is anticipated to shave off some tenths of a percent from previous estimates, bringing Q4 growth closer to 1.2%-1.5% year-over-year, versus earlier forecasts that approached 2%.
Effects on Q4 GDP Forecasts
Forecasters now expect annual GDP growth for 2025 to settle between 1.7% and 2% rather than the higher figures predicted prior to the retail slowdown.
The loss of momentum in core retail sales, particularly across categories like apparel and electronics, is weighing on personal consumption expenditure (PCE), a critical driver of quarterly GDP.
Holiday retail growth is projected to be less robust, with nominal sales boosted more by inflation than by real spending volume, meaning the macroeconomic impact will be moderate rather than expansive.
Broader Economic Implications
A “soft landing” for the U.S. economy is widely anticipated, with GDP growth moderating but not turning negative.
Retailers expect a challenging holiday season, as high prices and weaker consumer confidence may limit market upside for indexes like the S&P 500 .
The Federal Reserve may consider interest rate cuts in early 2026 to support growth, but there is caution about exacerbating inflation.
In summary, the September slowdown has led economists to temper Q4 GDP projections, signaling cautious optimism and an economy that is growing at a slower—yet still positive—pace.
U.S. retail sales rose by 0.2% in September 2025, falling short of the 0.4% growth economists had forecast and following a 0.6% increase in August. This slowdown reflects a period of more cautious consumer spending after strong gains during the summer months.