Signs advertising the closing of a Lord & Taylor store are displayed in New York, . The century-old Lord & Taylor store on New York's Fifth Avenue is holding a "store closing" sale starting ThursdayRetail Sales Lord and Taylor, New York, USA - 04 Oct 2018

Consumers tightened their belts for the second month in a row in September, raising concerns over the upcoming holiday shopping season.

Following a weak August, spending at the tills ticked up by just 0.1 percent last month, official figures showed. It was largely driven by the biggest drop in restaurant and bar sales in close to two years and fell short of Wall Street’s expectations for a 0.7 percent rise.

Hurricane Florence may have played a part in the worse-than-expected retail sales as it battered the Carolinas, but some economists believe that the numbers are also a sign of the strong consumer spending trend witnessed in the second quarter running out of steam.

As a result, economic consultancy IHS Markit downgraded its growth forecast for holiday retail sales, covering November and December, from 5 percent to 4.7 percent. If this materializes, it would still be a solid year for retailers, but it would also mark a step back from last year’s 5.3 percent rise.

The consultancy expects that rising gasoline prices — now at over $2.90 a gallon on average and forecast to soon reach $3 — will offset the boost consumers have received from tax cuts, while the recent turbulence in the financial markets may have spooked some shoppers.

“The recent sell-off in equity markets will likely cause consumers to think twice about additional discretionary spending, especially if market turbulence becomes routine over the next few weeks,” James Bohnaker, associate director at IHS, said.

“This is more likely to disrupt spending on luxury retail items and other big-ticket purchases, since higher-income households are more sensitive to swings in the stock market.”

Andrew Hunter, U.S. economist at Capital Economics, also agreed that sales growth will probably slow further in the fourth quarter and expects a “more marked slowdown in real consumption growth next year” as the boost to incomes from the tax cuts enacted at the beginning of the year start to fade and rising borrowing costs start to take their toll.

He was referring to the Federal Reserve’s policy of lifting rates from financial crisis-induced record lows. It nudged rates up again last month, marking the eight increases for consumers since 2015 and has signaled more are on their way.

While consumers have taken the increases in stride so far, the concern for retailers is that maintaining credit-card balances, student loans and many mortgages will become more expensive as rates continue to creep higher, which could lead consumers to start to curb discretionary spending.

Others, however, were more upbeat about the future path of retail sales. Moody’s vice president Mickey Chadha said he expects the overall improving economic fundamentals, coupled with increased credit availability, lower unemployment and wage growth, will “translate into higher consumer spending for the remainder of the year.”

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