U.S. September retail sales up 0.2%…slower than expected

Rising prices and increased layoffs reduce consumption among middle- and lower-income households

U.S. September retail sales were reported to have increased 0.2% month-on-month. This was significantly weaker than the 0.4% increase economists had expected. It is interpreted as consumption contracting sharply among middle- and lower-income households due to a cooling labor market and rising prices.

On the 25th (local time), the U.S. Department of Commerce released the September retail sales data, which had been delayed during the federal government shutdown (work stoppage). This follows a 0.6% increase in August, showing a slowdown in the rate of increase.

Excluding autos, gasoline, building materials, and food services, core retail sales fell 0.1% in September. Core retail sales are most closely related to the consumption expenditure component of gross domestic product (GDP).

Despite a temporary surge in electric vehicle sales at the end of September due to the expiration of the $7,500 tax credit for electric vehicles, overall auto sales fell for the first time in four months. Spending on electronics, clothing, and sporting goods also declined.

The slowdown in retail sales growth is seen as resulting from wealthy households increasing overall spending thanks to a strong stock market, while middle- and lower-income consumers sharply cut spending due to rising prices and a weakening labor market. Economists refer to this kind of income and consumption polarization in the U.S. as a K-shaped economy.

Job growth in the U.S. rebounded in September, but the labor market is weakening. The unemployment rate reached 4.4%, the highest in four years.

Kim Jeong-ah, guest reporter kja@hankyung.com