US Retail Sales September 2025 Fall Short of Forecasts

US retail sales rose 0.2% month-over-month in September 2025, the U.S. Census Bureau reported on Nov. 25, signaling a broad-based cooling in consumer demand ahead of the holiday season as wholesale prices firm. The increase was below the 0.4% consensus forecast and marked the smallest monthly gain since May.

Retail Sales Slow as Consumer Spending Shifts

Core retail sales, which exclude food services, autos, building materials, and gasoline, declined 0.1% in September after rising 0.6% in August. Gains were concentrated in miscellaneous store retailers (+2.9%), gasoline stations (+2.0%), health and personal care stores (+1.1%), and food services and drinking places (+0.7%).

Declines appeared in discretionary and nonstore categories: e-commerce sales fell 0.7%, sporting goods, hobby, music, and book stores dropped 2.5%, clothing slipped 0.7%, electronics and appliances declined 0.5%, and motor vehicles and parts eased 0.3%. Total retail sales for July through September were up 4.5% from the same period a year earlier.

Income Disparities Shape Spending Patterns

Spending remained concentrated among higher earners, with the top 20% accounting for 57% of total consumption through the second quarter of 2025. Real disposable income grew 4.0% in the third quarter for higher-income households but only 1.4% for lower-income households, contributing to uneven spending momentum.

Consumer confidence and sentiment remain subdued, especially among lower-income households, which report the weakest outlook. Credit performance is deteriorating for lower-income and younger borrowers, with rising delinquencies in subprime auto and federal student loans.

Inflation Pressures and Holiday Spending Outlook

The Producer Price Index (PPI) rose 0.3% month-over-month in September, reversing a 0.1% decline in August and signaling renewed wholesale inflation pressures.

Industry projections expect holiday sales in November and December to exceed $1 trillion, a 3.7% to 4.2% year-over-year increase largely driven by inflation rather than volume growth. Household surveys show average projected fourth-quarter spending per household at $7,834, up from $7,591 in June, with gift spending rising about 7% to $770.

Spending projections vary by income: households earning more than $200,000 are expected to increase holiday spending by roughly 9%, while those earning less than $50,000 are projected to reduce spending by about 2%. Fixed-income strategists warn that inflation and tariff pressures could further weaken consumer indicators in the near term, though tax-policy changes may temporarily boost disposable income for some low- and middle-income households in 2026.

Recent consumer data also show planned spending on big-ticket items and services slipping, with shoppers prioritizing value and necessities as the holiday season approaches.