U.S. retail sales were unexpectedly unchanged in September as stubbornly high inflation and rapidly rising interest rates dampened demand for goods.
The U.S. Commerce Department said on Friday (14th) that September sales data remained unchanged, while the August figure was revised up to a 0.4% increase from an initial 0.3% increase.
Economists had forecast retail sales to grow 0.2%.
Sales are also slowing as spending shifts to services. Mainly retail sales of goods are not adjusted for inflation.
Soaring rent and health care costs are squeezing the budgets of many Americans, leading to less spending on goods. The situation is compounded by higher borrowing costs, which make credit more expensive.
The Fed has raised its policy rate from near zero in March to its current range of 3% to 3.25% in response to inflation. After data released on Thursday (13th) showed that inflation rose strongly in September, it is expected to raise interest rates by 75 basis points for the fourth time in a row next month.
Core retail sales, which exclude autos, gasoline, building materials and food services, rose 0.4 percent. Data for August was revised up to a gain of 0.2% from flat.
Core retail sales are closest to the consumer spending component of gross domestic product (GDP).
Economists estimate that consumer spending likely grew at an annual rate of less than 1.0% in the third quarter, following a 2.0% increase in the April-June quarter.
Even so, GDP is expected to rebound last quarter following two consecutive quarters of contraction, largely as slowing domestic demand dampened imports and left a glut of unsold goods in warehouses.
The Atlanta Fed estimates that GDP grew 2.9% last quarter following contracting 0.6% in the third quarter. At the end of the month, the government will release an overview of GDP for the third quarter.