U.S. retail and restaurant sales rose modestly in September as consumers began pulling back after a summer of stronger spending, according to a delayed Commerce Department report released on Tuesday.
According to The Associated Press, sales increased just 0.2% from August, following gains of 0.6% in both July and August and a 1% rise in June. The report was delayed due to the government shutdown, along with other key economic data, which is not expected to catch up until late December.
The figures, unadjusted for inflation, suggest Americans were feeling the pinch of higher prices for groceries, rent, and imported goods affected by tariffs.
Retail sales account for roughly one-third of consumer spending, with the remainder going to services like travel, haircuts, and entertainment.
Despite the slowdown, economists project that higher spending could lift U.S. economic growth to about a 3% annualized rate in the July-September quarter, up from 1.6% in the first half of the year.
Much of the September spending growth came from rising prices at gas stations and grocery stores. Restaurants and bars saw a 0.7% increase in sales, reflecting some healthy discretionary spending, while clothing, electronics, and sporting goods stores reported declines.
Economists warn that consumer spending could soften further in the final months of the year.
“The moribund labor market and ongoing drag on real incomes from tariff-induced price increases suggest that this slowdown is likely to be maintained,” said Oliver Allen, an economist at Panthenon Macroeconomics.
Additional data underscores the uncertainty in the labor market. Payroll processor ADP reported that companies cut an average of 13,500 jobs per week over the four weeks ending Nov. 8, a sharp contrast to September’s government report showing 119,000 jobs added.
Unemployment rose to 4.4% in September, the highest in nearly four years.
Higher-income Americans are driving much of the spending, while lower-income households continue to struggle.
Bank of America data shows the poorest third of households saw wages rise just 1% year-over-year in October, compared with 3.7% for the top third—marking the widest income gap in nearly a decade.
Some retailers, however, reported positive results. Best Buy raised its sales and profit forecasts for the year, and Dick’s Sporting Goods also reported gains.
With the holiday shopping season about to begin, retailers hope for modest sales growth, as the National Retail Federation projects total holiday spending could exceed $1 trillion for the first time.
Inflation remains elevated but shows signs of easing.
The Labor Department reported wholesale prices rose 0.3% in September and 2.7% over the past year, while core prices excluding food and energy rose just 0.1% monthly and 2.6% annually.
Economists say the softer inflation data could increase the likelihood of a Federal Reserve rate cut next month.
Meanwhile, average wage growth is barely outpacing inflation, leaving many households with little extra income.
A separate report from JPMorgan Chase Institute found that typical household incomes have slipped to levels last seen in the early 2010s, after adjusting for inflation.
“Households are going into the end of the year with weak income growth and bank balances that remain flat,” the report said, highlighting the financial strain facing many Americans as the holiday season begins.
