US September Retail Sales Miss Forecasts at 0.2%; Core Control Group Contracts
US consumer spending cooled in September as headline retail sales rose 0.2%, undershooting the 0.4% consensus. The crucial “control group,” which feeds directly into GDP calculations, slipped 0.1%, signaling softer momentum in real consumption as the quarter closed.
Demand Mix Points to Narrow Strength
The miss was not broad-based but revealed fatigue across several discretionary categories. Excluding autos, sales rose 0.3%, matching expectations, while sales excluding autos and gasoline edged up just 0.1% after a downwardly revised 0.6% in August (from 0.7%). On a year-over-year basis, retail sales slowed to 3.9% from 5.0% the prior month.
– Auto-related categories fell 0.3%; auto and other motor vehicle dealers -0.2%. – Electronics and appliance stores -0.5%. – Clothing and accessories -0.7%; department stores -0.7%. – Nonstore retailers -0.7%. – Sporting goods, hobby, musical instruments and bookstores -2.5%. – Gasoline stations +2.0% (reflecting price effects). – Health and personal care +1.1%; food services and drinking places +0.7%. – Furniture and home furnishings +0.6%; building materials +0.2%. – Food and beverage stores +0.2% (grocery +0.3%).
The control group’s -0.1% print marked the weakest reading since August 2024, raising the risk that the consumption contribution to GDP could be revised down, even as headline retail sales for August were trimmed to 0.6% from 0.7%.
Implications for Growth and Policy
September’s softer impulse suggests a moderation in household demand, with discretionary categories under pressure and nominal growth decelerating. If this trend persists into the fourth quarter, it may weigh on corporate revenue trajectories and earnings guidance, while nudging policy expectations toward a more accommodative tilt. For now, one sub-consensus print is unlikely to materially shift the Federal Reserve’s reaction function, but it does temper growth optics and could reduce the urgency to tighten financial conditions if inflation continues to cool.
Market Reaction: Yields Ease, Dollar Dips
Treasury yields edged lower after the release, with the 10-year note slipping to around 4.017%, down roughly 1.9 basis points, as rates markets reassessed growth resilience. The US dollar initially weakened on the softer consumption signal before retracing part of the move. EUR/USD pushed toward technical resistance near its 200-hour moving average around 1.15670, peaking at approximately 1.1561 before easing back. Broader FX volatility stayed contained, but positioning skewed toward trimming USD longs intraday as risk appetite stabilized.
Market Highlights – Headline retail sales: +0.2% m/m (consensus +0.4%); August revised to +0.6%. – Ex-autos: +0.3% m/m (in line); ex-autos and gasoline: +0.1% m/m. – Retail control group: -0.1% m/m (vs. +0.3% expected), weakest since Aug 2024. – Retail sales: +3.9% y/y (vs. 5.0% prior). – 10-year Treasury yield near 4.02% (-1.9 bps); USD softer as EUR/USD tested the 1.1560s.
Q&A
What is the retail sales “control group” and why does it matter? The control group excludes autos, gasoline, building materials, and food services. It aligns closely with the goods component of consumer spending used in GDP calculations, making it a key gauge of underlying consumption.
Did the data change interest-rate expectations? Not decisively, but softer control-group momentum modestly reduces growth optimism at the margin. If subsequent inflation and labor prints stay benign, markets may lean toward a more dovish policy trajectory.
Which categories showed the most weakness? Discretionary areas underperformed, notably sporting goods (-2.5%), clothing (-0.7%), department stores (-0.7%), electronics (-0.5%), and nonstore retailers (-0.7%).
How did FX and bonds react? Treasury yields eased as investors priced a softer consumption pulse, while the dollar slipped initially. EUR/USD popped toward its 200-hour moving average near 1.1567 before paring gains. For more real-time market coverage, follow BPayNews.
