San Francisco Frontiers - US retail sales miss expectations as consumers see higher costs

Publication of official economic data has recently been delayed by a record-long goverment shutdown, and the latest figures suggest that consumer spending lost steam towards the end of the summer.

Economists warn that the softening in sales is likely to persist as President Donald Trump's tariffs add to costs while the labor market weakens.

Overall retail sales picked up by 0.2 percent on a month-on-month basis, said the Commerce Department, slightly below analyst expectations and cooling from August's 0.6 percent increase.

A separate report by the Labor Department showed that wholesale inflation picked up pace in September, rising by 0.3 percent, in line with forecasts.

This growth was driven by a 0.9-percent jump in goods prices, underscoring the steeper costs that businesses have been facing.

Much of it was attributed to the volatile food and energy segments.

But for now, some retailers continue to shield customers from the full effects of higher tariffs.

- 'Value-hunting' -

As Trump's tariffs take hold, all eyes have been on how consumers -- a key driver of the world's biggest economy -- respond to price pressures.

The US leader recently widened tariff exemptions to cover various agriculture products as costs of living weigh on American voters.

Besides the "muted growth" in September's retail sales, Navy Federal Credit Union chief economist Heather Long flagged notable monthly declines in categories hard hit by tariffs.

These include auto parts, electronics, appliances, sporting goods and instruments.

Sales at motor vehicles and parts dealers fell in September, while those at food and drinks stores eased. Sales at clothing, hobby and electronics stores all turned negative.

"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."

She stressed that the economy appears lopsided, with a growing gap between higher earners and lower-income households.

Both reports published Tuesday were delayed as a government shutdown between October and mid-November halted data releases on inflation, jobs and others.

The stoppage hit the collection of consumer inflation and employment data for October in particular, resulting in the cancellation of full reports on both fronts. Instead, available numbers will be released with November's figures.

On Tuesday, Commerce Department figures showed that September retail sales were up 4.3 percent from a year ago.

The producer price index report, meanwhile, indicated that "the inflation impulse from the tariffs is modest and underlying services inflation is still slowing," said Samuel Tombs of Pantheon Macroeconomics.

Underlying PPI inflation "should ease after producers have finished passing on tariff costs in a few months' time," he added.

J.Scott--SFF