29 Sept 2025
Recent economic data indicates an upward revision in monthly retail sales figures and a robust start for consumer spending in the second half of the year. This positive trend is driven by strong auto sales, extensive online advertising campaigns, and growing consumer confidence despite a somewhat softened job market.
Monthly retail sales data, while not changing as predicted, saw an upward revision of past figures, indicating a stronger previous performance.
The retail control group's previous forecast of 0.5% was revised upward to 0.8%, representing a significant positive adjustment.
July experienced an increase in retail sales, primarily driven by growth in auto sales and widespread online advertising efforts.
Retail sales, when adjusted to exclude automobiles and inflation, demonstrated a growth of 0.3%.
Sales growth was recorded in 9 out of 13 primary sectors, with motor vehicle sales exhibiting the highest growth, a trend sustained since March.
Online retail and general merchandise stores saw increased sales, largely attributable to online campaigns such as Amazon's Prime Day, Walmart's Deal Week, and similar Target promotions.
The report indicates a very favorable start for consumer spending in the second half of the year.
Consumers exhibit a willingness to spend due to the lifting of some tariffs, increased transparency in trade policies, and growth in the stock market, even in the context of a softened job market.
Consumer spending accounts for two-thirds of the U.S. economic activity, prompting Federal Reserve officials to monitor it with great precision.
Consumers primarily direct their spending towards large retailers like Amazon, Target, and similar big-box stores.
Some retailers are absorbing costs, believing tariffs will have a temporary effect, to avoid passing them on to consumers and thereby preventing a decrease in demand.
Retailers launch advertising campaigns, such as Prime Day, to encourage consumer spending and to reassure them about stable pricing or limited price changes to specific items.
The duration for which retailers like Amazon and Target can absorb costs and their willingness to continue this practice remains an open question.
If tariffs prove to have a lasting rather than temporary effect, it is questionable whether retailers will continue to absorb costs without passing them on to consumers.
Major retailers are currently demonstrating patience and absorbing costs to maintain consumer demand, according to observations and communications from these entities.
Consumer spending constitutes two-thirds of U.S. economic activity, making its close monitoring by Federal Reserve officials critical, and current reports suggest a strong consumer willingness to spend.
| Metric | Status/Value | Driver/Cause | Implication |
|---|---|---|---|
| Monthly Retail Sales | Upward Revised | Past data adjustment | Positive adjustment from previous figures |
| Retail Control Group | Revised from 0.5% to 0.8% | Past data adjustment | Indicates a stronger underlying trend |
| July Retail Sales | Increased | Auto sales growth, extensive online advertising | Strong short-term performance for the sector |
| Sales Growth (9/13 sectors) | Observed | General market conditions | Broad-based growth beyond specific sectors |
| Motor Vehicle Sales | Highest Growth | Continued since March | Sustained strength in a key sector |
| Online/General Merch Sales | Increased | Amazon Prime Day, Walmart Deal Week, Target promotions | Effectiveness of online campaigns in boosting sales |
| H2 Consumer Spending | Good Start | Tariff relief, trade policy transparency, stock market growth | Boost in consumer confidence despite a soft job market |
| Retailers' Cost Absorption | Ongoing | Belief in temporary tariffs, desire to maintain demand | Prevents immediate price hikes, supports consumer spending |
| Consumer Spending Share | 2/3 of US Economy | Fundamental economic structure | Critical for Federal Reserve monitoring and policy decisions |
| Future Cost Absorption | Questionable | Uncertainty of tariff permanence (temporary vs. lasting effect) | Potential for price shifts if tariffs prove persistent |
