Sales at U.S. retailers and restaurants in September increased by a modest 0.2% from August, according to the Commerce Department’s delayed monthly report, released after the federal government shutdown temporarily halted the publication of economic data. The rise marked a clear downshift from the stronger gains of 0.6% recorded in both July and August, and the 1% jump in June, when consumers had stepped up spending after a robust summer of travel and shopping.
Because the figures are not adjusted for inflation, the report suggests that Americans are still spending, but at a more cautious pace as higher prices absorb a larger share of household budgets. Retail and restaurant sales account for roughly one-third of overall consumer spending, with the remainder going largely to services. Economists estimate that the level of outlays in the July–September period will help lift third-quarter GDP growth to around 3% at an annual rate, compared with about 1.6% in the first half of the year.
The data underline the central role of consumers in the U.S. economy. Even a modest monthly rise can translate into meaningful support for activity, though the slower momentum in September compared with earlier months points to more selective spending as households adjust to persistent inflation and higher borrowing costs.
Inflation, Tariffs And Household Strain
A significant portion of the September increase came from higher receipts at gas stations and grocery stores, categories where price movements rather than larger quantities often drive the dollar value of sales. Households continue to face elevated costs for essentials such as food, rent, and energy, and many imported goods remain subject to tariffs that have raised prices on items from electronics to household products.
Those pressures weigh most heavily on lower-income families, whose wage gains have slowed while they devote a larger share of their budgets to necessities. By contrast, higher-income households, which benefited from rising home values and stock prices in recent years, are still providing much of the fuel for discretionary spending. Industry estimates indicate that retail sales in September were roughly 2.5% higher than a year earlier in nominal terms, even as growth in transaction volumes has cooled.
The broader backdrop has also become less favorable. The long-delayed September employment report showed that the economy added 119,000 jobs, but the unemployment rate edged up to 4.4%, with about 7.6 million people counted as unemployed – the highest jobless rate in roughly four years. Slower hiring, combined with still-elevated prices, could weigh on confidence and restrain future spending.
Mixed Signals From Discretionary Spending
Within the retail report, the picture across categories was uneven. Sales at restaurants and bars, climbed 0.7% in September, signalling that many consumers still feel comfortable spending on dining and social activities. However, receipts fell at clothing, electronics, and sporting-goods stores, areas that often weaken when households delay or reduce nonessential purchases.
The pattern suggests that consumers are reshuffling rather than uniformly cutting their budgets. Online retailers and large discount chains have benefited as shoppers search for promotions and cheaper alternatives to offset higher prices elsewhere. Major chains, including Walmart, report that customers are trading down to store-brand items and focusing on staples, even as overall sales volumes remain relatively resilient.
Retailers are adjusting their strategies accordingly, intensifying price promotions, managing inventories more tightly, and emphasizing value-oriented product lines. For companies focused on discretionary categories like apparel or home furnishings, the softer trend in September raises the risk of more aggressive discounts if demand slows further into the winter.
Outlook For Holiday Season And Growth
With the key holiday period approaching, retailers are watching closely for signs of fatigue among shoppers. Industry projections suggest that total holiday sales could still exceed 1 trillion dollars this year, supported in part by higher-income consumers and ongoing wage growth, although at a slower pace than during the post-pandemic boom.
Economists warn that several headwinds could restrain spending in the final quarter of 2025. The federal government shutdown that delayed the release of economic data has added to uncertainty for businesses and households. Rising borrowing costs, as the Federal Reserve keeps interest rates at restrictive levels, are feeding through to credit-card balances and auto loans, while persistent core inflation continues to erode purchasing power.
The combination of modest job gains, gradually cooling inflation, and still-positive retail sales suggests that consumers are trimming rather than halting their spending. September’s retail report points to an economy moving into a more mature phase of expansion, with growth increasingly dependent on whether households can sustain this more cautious pace of purchases as 2025 draws to a close.
