US retail sales lose steam, consumer confidence drops as costs rise
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WASHINGTON: US retail sales lost momentum in September (Nov 25), new government data showed on Tuesday, as firms faced higher costs and households grew more cautious amid rising prices and President Donald Trump’s tariffs.
The delayed figures pointed to weaker consumer activity toward the end of summer, while a separate survey showed consumer confidence falling to its lowest level since April.
Economists warn the slowdown is likely to continue as tariffs push up costs and the labour market softens.
The Commerce Department said overall retail sales rose 0.2 per cent from August, slightly below expectations and cooling from the previous month’s 0.6 per cent increase.
A Labor Department report showed wholesale inflation rising 0.3 per cent in September, driven by a 0.9 per cent increase in goods prices, particularly in food and energy. Some retailers, however, are still absorbing part of these higher costs to cushion consumers.
CONSUMERS TURN CAUTIOUS AS TARIFFS BITE
Affordability concerns have mounted, influencing voter sentiment and contributing to Democratic gains in off-year state elections in New Jersey, New York and Virginia. The White House has since widened tariff exemptions for several agricultural goods in response to cost-of-living pressures.
Navy Federal Credit Union chief economist Heather Long noted “muted growth” in retail sales and sharper monthly drops in tariff-sensitive categories including auto parts, electronics, appliances, sporting goods and musical instruments.
“American consumers are in value-hunting mode,” Long said. “They are spending more on the basics and being extra choosy with where they spend their discretionary dollars.”
There are also widening spending gaps between income groups. While wealthier households continue to spend, “middle- and lower-income families are turning more cautious heading into the holiday season,” said EY-Parthenon senior economist Lydia Boussour, citing pressure from a weakening jobs market.
RATE CUT EXPECTATIONS RISE
The retail data and soft private-sector hiring numbers strengthen the case for another Federal Reserve rate cut in December, Boussour said.
The Conference Board said consumers are now “less sanguine” about current conditions and “notably more pessimistic” about business prospects. Its confidence index fell to 88.7 in November from 95.5 in October, marking a seven-month low.
Federal officials are reviewing the latest private-sector indicators and delayed federal data as they weigh the need for another rate cut. Government releases for inflation and employment were postponed for weeks due to a shutdown from October to mid-November. Full reports for October will not be issued and partial figures will be folded into November’s releases.
On Tuesday, the Commerce Department said retail sales in September were still 4.3 per cent higher than a year earlier. The producer price index report indicated that the inflation impulse from tariffs remains “modest” and that services inflation continues to slow, said Samuel Tombs of Pantheon Macroeconomics.
Underlying producer-price inflation “should ease after producers have finished passing on tariff costs in a few months’ time,” he added.
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