Figures released by the Commerce Department last week show that the US retail market is continuing down the path of recovery. US retail sales increased 1.9% or $549.26 billion in September—surpassing economists' expectations of a .7% increase for the month. Year-over-year, retail sales have increased 5.9%.
The question is, can this momentum continue?
Healthy payroll growth, back-to-school spending and disaster-relief unemployment aid have fueled the recent market gains. "Today's data indicate that consumers are still driving the recovery forward — but there is growing doubt that the pace of activity can be sustained as income growth moderates and savings are being drawn down," James Watson, senior U.S. economist at Oxford Economics, said in a report by S&P Market Intelligence.
Recommended For You
But with growing discord over a government stimulus package and the November election around the bend, it is possible that consumer spending could retreat in the fourth quarter. In addition, the most recent unemployment report shows an increase in jobless claims to 898,000, up from 845,000. "If initial unemployment claims continue to rise, and if layoffs begin to focus on higher wage earners as corporations embark on cost-cutting strategies, consumer confidence and consumer spending could level off," said Quincy Krosby, chief market strategist at Prudential Financial, said in a S&P Market Intelligence interview.
The coming weeks will be a true test for the market. When looking at indicators like mortgage applications and credit and debit card spending, Watson added that the market might struggle to find direction.
However, a report by Marcus & Millichap suggests that holiday sales could be a bright spot for the market. In addition, money typically allocated to travel and entertainment could be funneled to retail.
It is also worth noting where consumers spent their retail dollars in September—in many cases they suggest a genuine return to pre-pandemic shopping patterns.
Clothing and clothing accessory stores increased 11% in September, leading the market in month-over-month gains. Back-to-school sales fueled activity in this market segment as well as adults who are adopting a more normalized work schedule, some in the office. Department stores in particular were a beneficiary of the increase in spending, with sales up 9.7% for September.
A handful of other retail segments also posted notable gains for the month, including sporting goods, hobby, musical instrument and book retailers, which saw a 5.7% jump in sales; grocery stores, which saw a 9.6% increase in sales; and motor vehicle parts and dealers, which saw a 3.6% increase in demand.
Year-over-year figures illustrated the sector's resilience as well. Although it had nominal monthly gains, building materials and home improvement stores had a 19.1% year-over-year increase in sales. Food and beverage retailers increased 10.5%, and nonstore retailers led the market with a 23.8% increase in sales year-over-year.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Kelsi Maree Borland
