US retail sales slowed in September as investors got the first official glimpse of consumer spending in two months on Tuesday morning after the government shutdown halted a wide swath of economic data.

Headline retail sales climbed 0.2% in September, below economists' expectations of a 0.4% month-over-month increase. By comparison, sales rose 0.6% in August, according to Census Bureau data.

The control group, which excludes several volatile categories and factors into the gross domestic product (GDP) reading for the quarter, decreased 0.1% following a 0.6% gain in August. Economists polled by Bloomberg had expected a 0.3% rise.

Sales excluding autos rose 0.3% from August to September, while sales excluding autos and gas increased 0.1%.

The report arrives at the start of a crucial holiday shopping season and carries added weight as investors and policymakers continue to operate without an official read on third-quarter GDP, even with the shutdown now over.

On Monday, the Bureau of Economic Analysis (BEA) announced it has canceled the advance Q3 GDP estimate and will reschedule both the second estimate and preliminary corporate profits, which were slated for release on Nov. 26.

Recent earnings from big box retailers have shown consumers remain resilient, but selective, prioritizing essentials and value-focused categories while reducing their discretionary purchases.

Executives at Target (TGT), Home Depot (HD), and Walmart (WMT) have all flagged ongoing pressure on lower- and middle-income households, particularly as inflation, tariffs, and interest rates squeeze budgets.

The report also lands less than a month before the Federal Reserve’s December meeting. Officials remain divided on whether to cut interest rates again or hold steady as the labor market shows further signs of slowing and inflation remains stubborn.

September’s labor report, released last week, showed stronger-than-expected job growth, but the underlying trend softened as prior months were revised lower and the unemployment rate rose to 4.4%, its highest level in nearly four years.

As of Tuesday morning, investors were pricing in an 85% chance the central bank cuts interest rates by the end of its December meeting, up from a roughly 50% chance seen just last week, according to the CME FedWatch Tool.

Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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