U.S. Retail Sales Cool, Producer Prices Tick Up, and Consumer Confidence Falls in November 2025

Weekly Economic Review: Nov. 28, 2025

This week’s economic data includes: (1) retail sales for September, (2) Producer Price Index (PPI) for September, (3) consumer confidence for November, (4) the Fed’s Beige Book for November, and (5) weekly initial jobless and continuing claims.

 

Key Summary:

Retail sales slowed in September, with weakness in core categories and the GDP-linked control group signaling softer consumer momentum and a weaker Q4 outlook, likely to temper earlier strong Q3 growth expectations.

Retail sales posted only a modest increase in September, signaling a slowdown in consumer momentum after strong summer spending. The monthly gain was well below expectations and marked a sharp deceleration from August, suggesting households are becoming more cautious amid economic uncertainty. While categories such as gasoline stations, health and personal care stores, and dining out evidenced growth, declines in online sales, clothing, electronics, and sporting goods offset these gains. Dining out continued to show resilience, highlighting discretionary strength among higher-income consumers, but overall spending patterns point to growing pressure on middle- and lower-income households.

 

Core retail sales excluding autos and gasoline barely advanced, and the control group—which excludes food services, autos, building materials, and gasoline stations and is used to calculate GDP—declined for the first time since April, missing forecasts and signaling a late-quarter softening in consumer activity. This weakness suggests a slight reduction may be in order to earlier robust Q3 GDP estimates, which had been buoyed by strong July and August data. The cooling trend could reinforce expectations for Federal Reserve rate cuts as demand eases and inflationary pressures moderate.

 

Looking ahead, the weak transition into Q4, combined with persistent inflation concerns and signs of labor market cooling, raises the risk of slower growth in the coming months. Despite September’s softness, Q3 GDP is still expected to remain solid, supported by earlier consumer strength and business investment, with the official advance estimate due December 23, 2025.

 

Wholesale prices rose modestly in September, driven by higher energy and food costs, while underlying inflation remained subdued with flat service prices and soft core measures.

The Producer Price Index rose 0.3% month-over-month in September, reversing August’s decline and aligning with expectations, while the annual rate held steady at 2.7%, slightly above consensus. The increase was driven by higher energy costs (+3.5%, led by gasoline) and food prices (+1.1%), pushing goods prices up 0.9%, their strongest gain since February 2024. Core goods rose modestly (+0.2%), while services prices were flat as gains in transportation and warehousing were offset by weaker trade margins.

 

Core PPI (excluding food and energy) edged up 0.1% MoM, below forecasts, and slowed to 2.6% YoY, its weakest pace since June. Super Core PPI (excluding food, energy, and trade services) also rose 0.1% MoM, undershooting expectations, while holding at 2.9% YoY. Overall, the data suggests moderate inflation pressures concentrated in goods still prevail, while underlying price trends remain subdued—supporting expectations for a cautious Fed stance on rates.

 

Consumer confidence declined in November, as concerns over the labor market and weaker spending plans signaled growing economic caution.

The Conference Board’s Consumer Confidence Index dropped 6.8 points to 88.7 in November, its lowest level since April and below expectations of 93.3, as concerns over labor market conditions and the broader economy deepened. The Present Situation Index fell to 126.9, with the labor market differential slipping to 9.7—near its weakest level since early 2021—indicating reduced optimism about job availability.

 

The Expectations Index declined sharply to 63.2, remaining below the recession signal threshold of 80 for the tenth straight month. Consumers grew more pessimistic about business, labor, and income prospects, while inflation expectations ticked up to 4.8%. Spending plans weakened across big-ticket items and services, although demand for used cars, TVs, and smartphones remained strong. Vacation intentions retreated after October’s surge, with domestic travel still favored over international trips. Overall, the data signals mounting caution among households heading into year-end.

 

Fed’s Beige Book shows steady overall activity with softer consumer spending, easing labor demand, and moderate price pressures, signaling stable outlooks but rising risks of slower growth ahead.

The Federal Reserve’s November Beige Book qualitative analysis reported largely unchanged economic activity, with consumer spending weakening among low- and middle-income households while remaining steady for upper-income groups. Manufacturing saw slight gains despite tariff headwinds, but services and residential construction softened. Labor markets eased as firms appeared to rely on hiring freezes and attrition rather than layoffs.  Wage growth remained modest, although pressures persisted in key sectors alongside rising insurance costs. Prices increased moderately due to tariffs and higher input costs, but firms faced mixed ability to pass these on, leading to margin compression. Overall, outlooks were stable but flagged risks of slower activity ahead.

 

Jobless claims hit their lowest level since April as continuing claims rose, signaling a labor market characterized by low layoffs but tougher reemployment.

Initial jobless claims fell by 6,000 to 216,000 for the week ending November 22, the lowest level since April and below expectations, signaling that businesses continue to retain workers despite recent layoff announcements. The four-week average dipped slightly to 223,750, while continuing claims rose to 1.96 million, marking the seventh consecutive weekly increase in the moving average. This trend suggests that although layoffs have been limited, securing new employment is becoming more difficult, reinforcing the current labor market dynamic of low hiring and low firing.

 

Equity markets rallied on optimism for a December Fed rate cut and holiday momentum, led by tech and consumer sectors, while Treasury yields eased and expectations shifted toward a more accommodative policy stance.

Equity markets finished the week strong, with the S&P 500 and Dow extending seven-month winning streaks and the Nasdaq rebounding despite earlier AI-related volatility. Gains were driven by optimism over a possible December Fed rate cut, holiday momentum, and strength in tech names like Alphabet and Intel. Communication services and consumer discretionary spending led the rally, while energy and staples lagged. Weekly gains: Nasdaq +5.83%, S&P 500 +4.75%, Dow +4.29%, Russell 2000 +8.47%.

 

Treasury yields slipped slightly on soft economic data, reinforcing expectations of easing inflation and slower growth. Markets now see an 83% chance of a December rate cut, up from 63% last week, and have priced in two cuts for mid-2026. If realized, the federal funds rate could fall to 3.25% from 4.00%, signaling a more accommodative stance ahead.

 

Let’s take a closer look at this week’s data releases, including retail sales, the PPI, the Beige Book, consumer confidence, and weekly initial and continuing jobless claims.

Retail Sales – September Update:

According to the U.S. Census Bureau, retail sales rose 0.2% month-over-month in September, slowing from August’s 0.6% increase,. The September figure, following several months of robust spending, came in below market expectations of a 0.4% increase, and was primarily driven by gasoline stations and food services & drinking places, partially offset by higher spending at online retailers and on motor vehicles. On a year-over-year basis, retail sales grew 4.3%, down from 5.0% in August.

 

Note: The September retail report was originally due on October 16 but was delayed due to the government shutdown.

 

Category Performance

Of the 13 retail categories tracked, 8 posted gains in September. Notable increases included:

• Miscellaneous store retailers: +2.9%
• Gasoline stations: +2.0%
• Health & personal care stores: +1.1%
• Food services & drinking places: +0.7%
• Furniture & home furnishings: +0.6%
• Building materials: +0.2%
• Food & beverage stores: +0.2%
• General merchandise stores: +0.1%

 

Food services & drinking places, a key indicator of household financial health and the only services component in the report, continue to post positive growth since May, signaling resilience in discretionary spending.

 

Conversely, five categories declined:

• Sporting goods, hobby, musical instrument & bookstores: -2.5%
• Non-store retailers (online): -0.7%
• Clothing: -0.7%
• Electronics & appliance stores: -0.5%
• Motor vehicle & parts dealers: -0.3%

 

The declines in online and clothing sales were largely attributed to a consumer pullback after a strong back-to-school shopping season.

 

Contribution to Headline Growth

Major contributors to the 0.2% monthly gain included:

• Gasoline stations: +0.14%
• Food services & drinking places: +0.1%
• Health & personal care stores: +0.06%
• Miscellaneous store retailers: +0.06%

 

These gains were partially offset by negative contributions from:

• Non-store retailers (-0.13%)
• Motor vehicles (-0.06%)

 

Core Retail Sales and Control Group

Retail sales excluding autos and gasoline rose 0.1% month over month, underperforming both the expected 0.3% increase and August’s 0.6% gain. Year-over-year growth was 4.2%. The control group—which excludes food services, autos, building materials, and gasoline stations and is used to calculate GDP—declined 0.1%, missing the 0.3% forecast and marking the lowest level since April. On an annual basis, control group sales increased 4.1%, the weakest growth since November 2024.

 

September’s 0.1% drop in the retail control group signals a late-quarter slowdown in consumer spending, pointing to a slight reduction in Q3 GDP expectations. While July and August data suggested strong growth – some forecasts near 4.0%, September’s weakness indicates a cooling economy and could reinforce expectations for Fed rate cuts as demand softens and inflationary pressures ease.

 

The weak handoff into Q4, combined with inflation concerns and a cooling labor market, raises the risk of slower growth ahead. Despite this, Q3 GDP is still expected to remain solid, supported by earlier consumer strength and business investment. The official advance estimate will be released December 23, 2025.

 

PPI – September Update: 

The Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) rose 0.3% month-over-month in September, following a 0.1% decline in August. The increase was driven primarily by higher energy prices (+0.18% contribution) and food prices (+0.06%). September’s figure was in line with expectations. On a year-over-year basis, PPI rose 2.7%, unchanged from August’s revised 2.7% (previously 2.6%) and above the consensus estimate of 2.6%.

Note: The report was delayed from its original October 16 release due to the government shutdown.

 

Goods Prices

• Goods prices (including food and energy) rose 0.9% MoM, the fifth consecutive monthly gain and the highest since February 2024.
• Energy prices surged 3.5%, led by an 11.8% jump in gasoline, reversing August’s 0.4% decline.
• Food prices climbed 1.1%, driven by sharp increases in beef (+15.8% MoM; +38.7% YoY) and fresh fruits (+7.1% MoM), partially offset by declines in eggs and vegetables.
• Core goods (excluding food and energy) rose 0.2%, with notable gains in jewelry, platinum & gold (+2.2%) and floor coverings (+1.3%).

 

Services Prices: 

• Services prices were unchanged after a 0.3% decline in August.
• Gains in transportation & warehousing (+0.8%) were offset by a 0.2% drop in trade margins, marking two consecutive monthly declines as wholesalers absorbed tariff costs.
• Key increases: airline passenger services (+4.0%), food wholesaling (+3.3%), and deposit services (+3.4%).
• Offsets: automobile retailing (-10.6%), machinery & vehicle wholesaling (-4.8%), and apparel & accessories retailing (-2.4%).

 

Core & Super Core PPI

• Core PPI (ex-food & energy) rose 0.1% MoM, below the 0.2% forecast, and 2.6% YoY, down from August’s revised 2.9% – the smallest annual gain since June.
• Super Core PPI (ex-food, energy & trade services) rose 0.1% MoM, below expectations of 0.3%, and 2.9% YoY, matching August’s pace.

 

Consumer Confidence – November Update:

The Conference Board’s Consumer Confidence Index fell 6.8 points to 88.7 in November from 95.5 in October, marking its lowest level since April 2025 and coming in below expectations of 93.3. The decline was driven primarily by growing concerns about the labor market and the broader economy.

 

Present Situation
The Present Situation Index dropped 4.3 points to 126.9 from 131.2, reflecting less optimism about current business and labor conditions. The labor market differential—jobs “plentiful” minus “hard to get”—fell to 9.7 from 10.3 in October, the second-lowest level since February 2021. The share of consumers reporting jobs as plentiful declined to 27.6%, while those saying jobs are hard to get edged down to 17.9%.

 

Expectations
The Expectations Index fell 8.6 points to 63.2, remaining below the recession signal threshold of 80 for the tenth consecutive month. Consumers were more pessimistic about business, labor, and income prospects over the next six months. Expectations for increased household income dropped to the lowest level since February 2023. Inflation concerns persisted, with price expectations rising to 4.8%. While recession fears eased slightly, the share of consumers believing the economy is already in recession rose for the fourth straight month.

 

Spending Plans
Plans for big-ticket purchases—cars, appliances, and electronics—declined, although used cars, TVs, and smartphones remain favored. Homebuying intentions dipped but stayed near two-year highs. Service spending intentions fell broadly, with an unexpected decline in anticipated healthcare spending ranking second only behind dining; discretionary categories like amusement parks and outdoor recreation were weakest. Vacation plans retreated after October’s surge, with domestic travel still outpacing international trips, aligning with reduced intentions for hotels and airfare.

 

The Fed’s Beige Book – November Update:

The Federal Reserve released its November 2025 Beige Book, based on information collected through November 17. This qualitative report, published eight times a year ahead of FOMC meetings, compiles insights from businesses, economists, and market experts across the Fed’s 12 districts to highlight economic trends not fully captured in data alone. Chair Powell has emphasized its importance in shaping policy views.

 

Overall Economic Activity

Economic activity was largely unchanged across most Federal Reserve Districts, with two noting modest declines and one reporting modest growth.

• Consumer spending continued to fall overall, but multiple districts, including New York, Atlanta and Minneapolis, reported that spending remained strong among upper-income consumers but weakened for low- and middle-income households.
• EV sales dropped after the federal tax credit expired, and travel and tourism showed little change amid cautious discretionary spending.
• Manufacturing saw slight gains despite tariff-related headwinds, while nonfinancial services revenues were flat to down, residential construction softened in some areas, and agriculture and energy remained stable
• Outlooks were mostly unchanged, though some contacts flagged risks of slower activity ahead.

 

Labor Markets

Employment edged down slightly, with about half of Districts reporting weaker labor demand.

• Most firms used labor-saving tactics like hiring freezes, attrition, or hour adjustments rather than layoffs.
• Employers generally found it easier to hire, though skilled roles and fewer immigrant workers posed challenges, and some firms used AI to replace entry-level jobs or boost productivity.
• Wage growth was modest overall, but manufacturing, construction, and health care faced more pressure due to tight labor supply, while rising health insurance premiums continued to drive labor costs upward.

 

Prices

Prices increased moderately, driven by widespread input cost pressures in manufacturing and retail, largely due to tariffs, along with rising costs for insurance, utilities, technology, and health care.

• Firms faced mixed ability to pass these costs to customers, leading to margin compression for some, while certain material prices fell amid weak demand and tariff adjustments.
• Upward cost pressures are expected to persist, but near-term plans for price hikes remain uncertain.

 

Jobless Claims – Week Ending November 22:

The Labor Department reported that initial jobless claims fell by 6,000 to 216,000 for the week ending November 22, down from 222,000 the prior week (revised up from 220,000). This marks the lowest level since the week ending April 11 and came in below market expectations of 225,000. The four-week moving average declined slightly to 223,750, down 1,000 from the previous week. These figures suggest businesses are largely retaining employees despite a recent uptick in announced job cuts by public companies.

 

Continuing claims, which track the total number of individuals receiving unemployment benefits, rose to 1.96 million for the week ending November 15, up 7,000 from 1.953 million (revised down from 1.974 million) the prior week. This was slightly below expectations of 1.963 million. The four-week moving average edged up to 1.956 million, continuing a seven-week upward trend. This suggests that while initial claims remain subdued, finding new employment is becoming more challenging.

 

Overall, the data reinforces the current labor market dynamic of low hiring and low firing, with employers holding onto workers even as job openings tighten.

 

Market Analysis:

Equity Market Weekly Recap

Equity markets closed the week on a strong note, with the S&P 500, Dow Jones Industrial Average (DJIA), and Nasdaq all posting weekly gains. The S&P 500 and DJIA extended their winning streaks to a seventh consecutive month, while the Nasdaq’s monthly streak was interrupted by earlier volatility and concerns over artificial intelligence stock valuations.

 

The broad rally was fueled by renewed expectations of a Federal Reserve interest rate cut in December, Thanksgiving boost, and strength in AI-related stocks such as Alphabet and Intel. Communication services and consumer discretionary sectors led the holiday-shortened week’s gains, while energy and consumer staples lagged slightly but still finished higher.

 

Weekly and Year-To-Date (YTD) Performance Highlights:

• Nasdaq: +5.83% (weekly), -0.91% (MTD) & +21.00% (YTD), closing at 23,366
• S&P 500: +4.75% (weekly), +0.39% (MTD) & +16.45% (YTD), ending at 6,849
• Dow Jones Industrial Average: +4.29% (weekly), +0.41% (MTD) & +12.16% (YTD), closing at 47,716
• Russell 2000: +8.47% (weekly), +1.40% (MTD) & +12.12% (YTD), ending at 2,500

 

Treasury Market Update

Treasury yields declined across the curve this week:

• 2-year yield: 3.47% (-0.04%)
• 5-year yield: 3.59% (-0.03%)
• 10-year yield: 4.02% (-0.04%)

 

The decline was primarily driven by soft economic data, including the PPI and retail sales, which reinforcing the narrative of a slowing economy and cooling inflation – heightening expectations for a Federal Reserve interest rate cut in December.

 

Rate Cut Expectations

Markets now assign a higher probability to a rate cut at the December 9–10 FOMC meeting, with odds rising to 83% from 63% last week. Looking ahead to 2026 and 2027, markets have fully priced in two 25-basis-point cuts in June and September. Expectations for a January 2027 cut have eased slightly, dropping to 65% from 80% last week, which is a coin flip. These moves would lower the federal funds rate upper bound to 3.25% from the current 4.00%.

 

Next Week’s Economic Calendar:

Key Scheduled releases include:

• 12/1 (Monday):
  • ISM Manufacturing Index (November)
• 12/3 (Wednesday):
  • ISM Services Index (November)
  • ADP Employment Change (November)
• 12/4 (Thursday):
  • Challenger Job Cuts (November)
  • Weekly Initial and Continuing Jobless Claims
  • PCE Price Index, and Personal Income & Spending (September)
  • Consumer Credit (October)

For a visual representation of this week’s economic review, you can view or download the slide deck here:11.28.2025 CBC Weekly Economic Update Slides

Mark Yoon, CFA CPA

EVP & CFO of Commercial Bank of California

 

Thomas McCullough

EVP of Commercial Bank of California

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