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Q3 real PCE tracking at about 3% post retail sales

Published on November 26, 2025

Gerard MacDonell

Yesterday’s long-delayed retail trade report for September came in weaker than expected, with retail control being reported down 10 basis points vs the 30 bps gain expected. However, the report does not really undermine the view that consumer spending growth remains solid, and for three reasons:

The report comes in the wake of quite strong consumer spending data in less recent months.
The best guess for broader real PCE growth is not all that sensitive to the retail sales figures. Rather, the real PCE guess tends to be dominated by estimates for (largely) services spending, which is not informed by the retail sales figures. People mostly extrapolate the trend from prior months, which suggests a gain of 0.2% in real terms for that component during September. If anything Big Data would imply greater strength, but I am sticking with the rote extrapolation.
My colleagues at 22V tell me that the color from retailers during reporting season has been quite upbeat, including the guidance into Q4 so far. October auto sales were on the soft side, which will weigh on October. But they are obviously noisy month to month.

Based on the official data we now have in hand, I estimate – I presumed conventionally – that broader real PCE will have been up 10 bps during September. Assuming bravely but neutrally that there are to be no meaningful revisions in the data to August, that would imply that real PCE growth in Q3 will ultimately be reported at +3% (ar). That is exactly in line with the Bloomberg consensus, which has edged up recently. And it is pretty close to what the Atlanta Fed is guessing, although they are not unusually slightly optimistic, this time at 3.2%.

If my estimates and assumptions were to turn out correct, then the statistical launch into Q4 would be about neutral. For example, sequential growth of real PCE of 2.5% (ar) in each of the three months of Q4 would deliver a 2.4% (ar) growth of real PCE for Q4.

I like to cross check the quarterly bean counts, which can be arbitrary, with my sense of the underlying trend of real PCE, based on a plot of the level of real PCE ex-autos. That too looks to be tracking at 2.5%, suggesting that the Q3 bean count gives just a slightly optimistic impression.

It continues to look like underlying is 2.5%

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AI-generated content may be incorrect. — *Source: BEA, NBER, FH calculations*
*Data are actual to August and an estimate for September that should be quite close to consensus.*

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