| Tuesday, November 25, 2025 Dear Valued Reader, After a 43-day government shutdown halted economic data releases, Tuesday brought the first official glimpse of consumer spending in two months—and the picture shows Americans pulling back. September retail sales rose just 0.2%, half what economists expected, while producer prices jumped on surging energy costs, creating a challenging backdrop for both the Federal Reserve and holiday retailers. Key TakeawayRetail sales rose 0.2% in September versus 0.4% expected, while the GDP-linked control group fell 0.1%. Producer prices jumped 0.3% on energy costs, suggesting inflation pressures persist even as consumer spending slows. Fed rate cut odds have surged to 85% for December as the data shutdown delays Q3 GDP release indefinitely. Retail Sales DisappointHeadline retail sales climbed just 0.2% in September, down from August's 0.6% gain and below the 0.4% economists anticipated. The control group, which excludes volatile categories and feeds into GDP calculations, actually decreased 0.1% after August's 0.6% gain. Economists had expected a 0.3% increase. Sales excluding autos rose 0.3%, while sales excluding both autos and gas increased just 0.1%. The weak control group reading suggests third-quarter GDP growth was likely softer than previously estimated, though official confirmation remains impossible with the shutdown delaying data releases. GDP Data Still MissingThe Bureau of Economic Analysis announced Monday it has canceled the advance Q3 GDP estimate entirely, with no firm reschedule date for either the second estimate or preliminary corporate profits originally slated for November 26th. This leaves investors and policymakers operating without official confirmation of economic growth for the quarter that ended over a month ago. The data vacuum comes at a particularly difficult time, with the crucial holiday shopping season beginning and the Federal Reserve preparing for its December policy meeting. Without GDP data, the Fed must rely more heavily on employment and inflation readings to guide decisions. Consumer Resilience FadingThe retail sales weakness aligns with recent warnings from major retailers. Executives at Target, Home Depot, and Walmart have flagged ongoing pressure on lower- and middle-income households as inflation, tariffs, and elevated interest rates squeeze budgets. Earnings reports show consumers remain resilient but increasingly selective, prioritizing essentials and value-focused categories while pulling back on discretionary purchases. This bifurcated spending pattern—the wealthy still spending, the middle class pulling back—creates challenges for retailers heading into the holiday season. Producer Prices JumpWhile consumers pull back, producer prices rebounded sharply. The Producer Price Index increased 0.3% in September after falling 0.1% in August, matching economist expectations. Producer goods prices jumped 0.9%, the largest gain since February 2024, with energy goods accelerating 3.5% and accounting for two-thirds of the increase. Wholesale services prices remained unchanged after falling 0.3% in August. That August decline had suggested wholesalers were absorbing Trump's tariffs rather than passing them through, but September's stabilization indicates that absorption may be ending as margins get squeezed. The 2.7% year-over-year PPI increase suggests inflation pressures persist at the wholesale level, even as consumer demand softens. This creates the challenging stagflationary dynamic the Fed most wants to avoid. Fed ImplicationsSeptember's employment report showed stronger-than-expected job growth on the surface, but underlying trends weakened with prior months revised lower and unemployment rising to 4.4%—the highest in nearly four years. Combined with weak retail sales, the data suggests the labor market and consumer spending are both losing momentum. Investors have responded by dramatically increasing rate cut expectations. As of Tuesday morning, markets were pricing in an 85% chance of a Fed rate cut at the December meeting, up from roughly 50% just last week. The Fed faces a difficult decision without GDP data to confirm growth trends. Weak retail sales and rising unemployment suggest the economy needs support, but elevated producer prices indicate inflation risks remain. Adding complexity, the shutdown-delayed data means policymakers are making decisions with incomplete information about recent economic performance. Market ImplicationsThe combination of slowing consumer spending and persistent wholesale inflation creates a challenging environment for stocks, particularly consumer discretionary companies heading into the critical holiday season. Retailers face the prospect of softer demand meeting higher costs, squeezing margins exactly when they need strong performance most. For the broader market, the Fed's likely December rate cut provides support, but questions about economic growth momentum create uncertainty about whether lower rates can stimulate activity or merely prevent further slowdown. The ongoing absence of GDP data adds another layer of uncertainty, as investors lack official confirmation of growth trends and must instead piece together the picture from partial indicators. BLACK FRIDAY FLASH - SLINGSHOT 60% OFF The Blue Candle System: 80%+ Win Rates 3 simple steps: Warm up → Entry → Profit target BLACK FRIDAY PRICE: $197 LIFETIME (Regular $497) - 87.57% win rate on QQQ
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