by Stephen Garner

U.S. retail sales fell for the first time in seven months in September, suggesting that manufacturing-led weakness could be spreading to the broader economy.

Retail sales in September were down 0.1 percent seasonally adjusted from August but up 4.5 percent unadjusted year-over-year, the National Retail Federation (NRF) said on Wednesday. The numbers exclude automobile dealers, gasoline stations and restaurants.

“The pullback in September compared with August is possibly a reaction to increased fears over U.S.-China tensions,” said Jack Kleinhenz, chief economist at NRF. “While uncertainty around trade policy and other issues has dampened consumer sentiment recently, consumers still have a lot going for them as evidenced by longer-term trends and factors like the tight labor market. September is a tricky month to measure because of seasonal factors like the end of summer and back-to-school spending, and this year’s early Labor Day may have moved up some spending into the last days of August.”

As of September, the three-month moving average was up 4.9 percent over the same period a year ago, compared with 4.1 percent in August. September’s results build on gains of 0.5 percent month-over-month and 4.7 percent year-over-year in August.

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NRF’s numbers are based on data from the U.S. Census Bureau, which said today that overall September sales – including auto dealers, gas stations and restaurants – were down 0.3 percent seasonally adjusted from August but up 4.1 percent unadjusted year-over-year.

Specifically, online and other non-store sales were up 15.6 percent year-over-year but down 0.3 percent month-over-month seasonally adjusted. Clothing and clothing accessory stores were down 0.7 percent year-over-year but up 1.3 percent month-over-month seasonally adjusted.

Last month’s drop and August’s unrevised gain in core retail sales suggested a much more significant slowdown in consumer spending in the third quarter than economists had been anticipating after a surge in the prior quarter.

Consumer spending, which accounts for more than two-thirds of the economy, increased at a 4.6 percent annualized rate in the second quarter, the most in 1-1/2 years. After the release of the data, economists cut their third-quarter consumer spending growth estimates to around a 2.5 percent rate from a 3 percent pace.

Signs the economy’s growth engine was sputtering could further stoke financial market fears of a sharper slowdown in economic growth. Some economists speculated the cooling in hiring was probably making Americans more cautious about spending.