U.S. retail sales rose 0.2% month-on-month in September—significantly below expectations—with auto sales being the primary drag.

U.S. retail sales in September underperformed expectations, posting a modest 0.2% month-on-month increase—well below the market forecast of 0.4% and markedly slower than the 0.6% growth recorded in August. More notably, core retail sales (excluding automobiles and gasoline) rose only 0.1% month-on-month in September, far short of the expected 0.3%, signaling weakening consumer spending momentum. This data—originally scheduled for mid-October release—was delayed until this week due to a 43-day federal government shutdown. On September 25, the U.S. Department of Commerce released the following figures: • U.S. retail sales rose 0.2% month-on-month in September, versus an expectation of 0.4% and a prior reading of 0.6%. • Retail sales excluding automobiles rose 0.3% month-on-month, matching expectations. • Retail sales excluding automobiles and gasoline rose 0.1% month-on-month, versus an expectation of 0.3%. Broad-based slowdown in sales Although U.S. retail sales posted their fourth consecutive month of positive growth in September, the 0.2% gain marked a clear deceleration from the previous month—and fell short of consensus forecasts. By category, only 8 out of 13 retail sectors reported growth. Key contributors included gas stations, personal care stores, and miscellaneous retailers. In contrast, auto sales declined for the first time in four months. Sales in discretionary categories—including electronics, apparel, and sporting goods—also broadly weakened. Notably, the electric vehicle tax credit policy—which had previously supported auto demand—expired at the end of September, revealing its pent-up demand effect.

The U.S. ISM Manufacturing Index remained in expansion territory in September but declined for the second consecutive month; meanwhile, cost pressures surged sharply, prompting the S&P 500 to turn negative and long-dated Treasuries to come under pressure.

In September, the ISM Manufacturing Prices Index surged 6.8 percentage points month-on-month to 77.9—approaching the March 2024 level of 78.3, which coincided with the initial outbreak of hostilities in Iran. This marks the 24th consecutive month of rising raw material prices. According to ISM, 58.6% of surveyed firms reported higher raw material prices in September—up from 46.2% in August—and all 16 manufacturing industries reported price increases, with none reporting declines. The scope of price hikes was broad, encompassing aluminum, copper, steel, fuel, freight, electronic components, semiconductors, and memory modules. Notably, rising steel and aluminum prices are affecting the entire manufacturing value chain, while tariffs and oil-price spikes triggered by Middle East conflict are further inflating corporate costs. Meanwhile, supply-chain pressures persist. The Supplier Deliveries Index stood at 59.0 in September—slightly improved from 59.3 in August—but still indicates slow delivery speeds. This marks the tenth consecutive month of supplier delivery delays. Major industries—including computers and electronics, machinery, food, transportation equipment, and chemicals—reported slower supplier deliveries in the ISM survey. Media reports note that robust domestic demand—especially AI infrastructure investment and corporate restocking—has helped sustain U.S. manufacturing momentum. Yet rising energy costs and supply-chain disruptions are intensifying inflationary pressures. Williamson, an economist at S&P Global, commented: “The pace of U.S. manufacturing growth accelerated again in September.” He noted that surging new orders prompted factories to significantly ramp up output and hiring, pushing the PMI to a four-year high, adding: “The backlog of unfulfilled orders continues to grow, and suppliers’ workloads are increasingly heavy—indicating tightening capacity as firms strive to meet demand from both consumer and business markets. This phenomenon is especially pronounced in investment and production of machinery, often linked to rising AI-related expenditures. Precautionary inventory accumulation—driven by concerns over pricing and supply chains—continues to support demand, although the persistent decline in export orders remains disappointing.” “The ‘strong demand + high costs’ combination weighs on markets From a market perspective, the September ISM report sent a notably complex signal. On one hand, improvements in new orders, order backlogs, and employment suggest no obvious cooling in U.S. manufacturing activity. On the other, the sharp rise in the prices index and continued sluggish supplier deliveries indicate mounting cost pressures for businesses. This explains why the PMI—down just 0.1 point from the prior month but clearly below expectations—did not serve as a straightforward ‘soft-landing positive.’ Instead, markets focused on the price component: resilient manufacturing demand coupled with markedly higher input costs may make inflationary pressures harder to dissipate quickly. Following the data release, the U.S. equity market—initially up slightly—turned negative, while U.S. Treasury yields continued to climb, with the 30-year yield registering the steepest price decline. Against the backdrop of already elevated long-end Treasury yields, the rebound in the manufacturing prices index has further reinforced market concerns about persistent inflation and prolonged high interest rates.

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US September Auto Sales Fall 3.5% as Affordability Issues Mount; Chemical Sector Impact Noted

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