Retail sales lost momentum in September
Consumers turn cautious.
November 25, 2025
September retail sales increased 0.2% after rising 0.6% in August. The outcome was weaker than the expected 0.4% gain. Excluding autos, retail sales rose 0.3%, which was in line with market expectations and consistent with estimates provided by credit card companies. A closer look at discretionary categories posting declines suggests consumers turned cautious as the third quarter drew to a close.
Sales at motor vehicle and parts dealers fell 0.3%, which was anticipated given the sharp drop-off in unit sales. Light vehicle sales fell to a 15.3 million annualized selling pace in September from 16.4 million in August. The expiration of credits for electric vehicles contributed to the decline.
A number of categories lost ground in September. Sales at sporting goods stores decreased the most, down 2.5%, followed by apparel sales which lost 0.7% and electronics stores, off 0.5%. Wholesale prices for clothing rose 4.1% according to the September PPI report. Some of that increase will have been transmitted to retail outlets and crimped sales. Even online retailers posted a rare decline, down 0.7%. Gasoline station sales rose 2%, consistent with the 4.1% increase in gasoline store sales. Other sales gains included health and personal care stores, up 1.1%, furniture up 0.6% and building materials stores up 0.2%. Sales at restaurants and bars increased by 0.7%, slightly off the August rise of 1.0%.
Core retail sales, which exclude eating and drinking places, automobile dealers, gasoline stations and building materials stores, edged lower by 0.1%, after adding 0.6% in August; that is a notable loss in momentum from earlier in the third quarter. In turn, it could shave off a couple tenths of one percent from our estimates of 3.8% for GDP and 2.5% for PCE.
While a rate cut would be intended to keep the economic expansion going, there is a danger it could further stoke inflation.
Ken Kim
KPMG Senior Economist
Bottom Line
Consumer spending turned cautious in September against the backdrop of a softening labor market and creeping inflation. Lower income households continue to feel inflation more; they are barely keeping up in this bifurcated economy. We expect the Federal Reserve to cut short-term interest rates by another one-quarter percentage point at the December meeting, despite large divisions in ranks of Fed. That will keep policy modestly restrictive, while easing pressure on employers and well to do consumers. The producer price index revealed how many employers have absorbed the shock of tariffs in margins and thus stopped hiring or worse. The Fed's dual mandates will be in tension, with inflation elevated and employment weak as we close out the year. There is no risk free path for policy at this juncture.
Explore more
Insight
Retail sales beat expectations
Sales rose even outside of autos.
Insight
KPMG Economics
A source for unbiased economic intelligence to help improve strategic decision-making.
Insight
Policy in Motion: Insights for navigating with confidence
Your resource for the latest on trade, tariff and regulatory policy changes.
Subscribe to insights from KPMG Economics
KPMG Economics distributes a wide selection of insight and analysis to help businesses make informed decisions.
Meet our team
