US retail sales increased at a slower pace in September, signaling that consumer demand is starting to weaken as the country has just emerged from a government shutdown that delayed the release of key economic data. Core retail sales rose by only 0.2%, well below market expectations and half of August’s growth.
Retail sales excluding automobiles, gasoline, building materials, and food services declined by 0.1%, indicating underlying softness in consumer spending. Other core sales also showed moderate growth and reflected changing purchasing behavior ahead of the holiday season.
Major retailers reported that consumers are now more cautious, opting for essential goods. Walmart, Target, and Home Depot emphasized ongoing pressure on low- and middle-income households due to inflation, tariffs, and higher borrowing costs.
This retail sales report was also released as the Federal Reserve considers its next monetary policy moves ahead of the December meeting. Fed officials hold differing views, especially after September labor market data showed mixed job growth and the highest unemployment rate since 2021.
Despite the mixed economic picture, the market appears increasingly confident about the possibility of a rate cut in December, with the probability now rising to 85%. Investors see the weak retail data as an additional factor that could prompt the Fed to ease policy sooner.
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