US inflation picked up in September 2025, sharpening pressure on retailers already contending with slower sales growth and cost-sensitive shoppers. The consumer price index rose 3.0% year on year and 0.3% on the month, with energy—especially petrol—leading the increase.
Core inflation also printed 3.0%, signalling persistent price pressures beyond food and fuel.
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Impact on consumer spending
Higher prices are reshaping shopping habits. Households are trimming discretionary purchases and prioritising essentials, a pattern flagged throughout 2025 consumer surveys.
Industry research shows a marked pullback in spending intentions for non-essentials as anxiety about prices lingers, even among higher-income households. That caution dovetails with real-world checkout data: third-party card-spend trackers indicate September retail sales growth eased from August on a year-over-year basis.
Within categories, apparel, accessories and consumer electronics remain vulnerable when inflation flares, as shoppers defer upgrades and hunt for deals.
While headline results for September showed pockets of growth—such as general merchandise and electronics—other areas like furniture and home furnishings underperformed, a typical sign that big-ticket buys are being postponed.
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By GlobalDataAnalysts also note that value-seeking behaviour is lifting traffic at discount and mass merchants, where shoppers can trade down to cheaper brands or private label.
The “value first” mindset is visible online as well. E-commerce trackers report consumers are prioritising promotions and lower-priced alternatives, and trade bodies say sales momentum cooled on a month-over-month basis in September even as year-over-year growth held up, underscoring price sensitivity as inflation spikes.
Tightening profit margins
For retailers, inflation compresses margins from both sides: operating costs rise while customers resist further price increases. September’s CPI showed fresh pressure from energy, with petrol up sharply on the month—costs that ripple through logistics, store utilities and last-mile delivery.
Passing those costs through is harder when shoppers are already trading down, so many chains lean on selective price holds and targeted promotions to protect volumes, accepting slimmer unit margins.
Sales data paint a mixed picture that reinforces the squeeze. Card-spend estimates suggest overall growth is slowing compared with late summer, even as some categories post gains.
That deceleration, paired with stickier core inflation, narrows the room for mark-ups. Retailers are responding by negotiating harder with suppliers to lower input costs and by simplifying assortments to focus on faster-turning SKUs.
The broader backdrop also matters for planning. The September CPI release—brought forward despite a federal shutdown—confirmed inflation remains above the Federal Reserve’s 2% target, complicating rate-cut expectations into year-end.
Financing costs influence inventory carrying costs, capital projects and lease decisions, adding another constraint on margin recovery.
Strategies for retailers
Adjust pricing strategy. Chains are widening price ladders: introducing more entry-level items to capture budget-conscious shoppers while preserving a smaller set of premium, higher-margin products for resilient demand. Everyday-value positioning and sharper price-matching on known-value items aim to prevent churn without triggering broad-based margin erosion.
Improve operational efficiency. Many are accelerating supply-chain optimisation—consolidating vendors, diversifying sourcing to mitigate tariff- and freight-related costs, and using automation in forecasting and replenishment to curb waste. Energy-efficiency projects, from LED retrofits to smarter HVAC, can cushion utility bills that climb when fuel prices spike. The latest inflation mix, with energy driving the monthly uptick, strengthens the case for such savings.
Rethink promotions and loyalty. Rather than blanket discounting, retailers are prioritising targeted offers delivered through loyalty programmes to protect profitability while rewarding the most engaged customers. Online channels show shoppers actively searching for deals and trading down to cheaper alternatives; personalised promotions can meet that demand without undermining full-price sell-through across the board.
Refocus on value messaging. Marketing is shifting towards durability, total cost of ownership and convenience. Clear comparisons between private label and national brands, and transparent “price hold” pledges on staples, help reassure consumers who remain wary of future price rises.
Looking ahead
With September 2025 inflation re-accelerating to 3.0% and petrol costs pushing up monthly prices, the retail landscape tilts in favour of value formats and lean operators.
Expect continued trading down, cautious discretionary spend and ongoing pressure on gross margins through the peak trading season.
Execution will hinge on disciplined pricing, supply-chain efficiency and precise, loyalty-led promotions to keep cost-sensitive customers from drifting—while preserving enough margin to navigate another bout of price pressure.
