U.S. Retail Sales Miss Expectations in September as Consumers Show Signs of Caution

U.S. retail sales grew less than expected in September, offering a potential signal that American consumers are turning more cautious amid a weakened labor market and the lingering impact of broad import tariffs.

The key gauge of consumer spending — which makes up over two-thirds of U.S. economic activity — was delayed by the record-long government shutdown, prompting some analysts to warn that conditions for households may have shifted since the data was collected.

Still, the Federal Reserve is closely watching the wave of postponed economic releases ahead of its interest rate decision next month. Reports suggest policymakers remain split over whether to cut rates again to bolster the soft jobs market or wait for fresher economic inputs. The Fed previously cut rates by 25 basis points in both September and October, lowering the target range to 3.75%–4%.

Market expectations for another cut have strengthened significantly. CME’s FedWatch Tool shows traders assigning roughly an 85% probability to another quarter-point reduction at the December meeting.

Wall Street is also monitoring the health of U.S. households as the holiday shopping season begins, marked by heavy Black Friday and Cyber Monday promotions.

According to the Commerce Department’s Census Bureau, retail sales rose 0.2% in September, following a 0.6% increase in August. Economists had expected 0.4%. On an annual basis, sales were up 4.3%.

“Core” retail sales — which exclude automobiles, gasoline, building materials, and food services — edged up just 0.1%, following a downwardly revised 0.6% rise in August. These core figures more closely track the consumer spending component of U.S. GDP.

PPI Data Matches Expectations

In separate data released Tuesday, U.S. producer prices rose in line with forecasts for September, supported by higher costs for gasoline, motor vehicles, and meat products. The final demand services index was unchanged after falling in August.

• Headline PPI: +0.3% month-on-month (vs. -0.1% in August), +2.7% year-over-year
• Core PPI: +0.1% month-on-month, +2.6% year-over-year — both below estimates

Analysts noted that a December Fed rate cut now looks “very likely,” but cautioned that investors should focus on the forward guidance, which could shift in a more hawkish tone depending on the Fed’s outlook for early 2026.