StatsCan reports back-to-back drops in retail sales as consumers cut spending amid tax shift and tariffs
Retail sales in Canada declined 0.6 percent to $69.4bn in January, according to Statistics Canada.
The drop followed a 2.6 percent surge in December, which coincided with the federal government’s temporary sales tax pause on selected items, in place from December 14 to February 15.
According to Bloomberg, Economist Katherine Judge at Canadian Imperial Bank of Commerce stated that “the downbeat data today appears to mostly be a normalization in activity after spending was pulled forward into December with the start of the GST holiday.”
The January decline marked the first back-to-back monthly drop since mid-2023. In volume terms, retail sales fell 1.1 percent, the steepest decrease in two years.
Core retail volumes, which exclude gasoline stations and motor vehicle and parts dealers, declined 0.2 percent.
Motor vehicle and parts dealers drove the headline decline, with overall sales down 2.6 percent in the subsector. New car dealers fell 3.2 percent, and automotive parts, accessories and tire retailers dropped 2.8 percent. Only used car dealers posted growth, with a 1.6 percent rise.
Food and beverage retailers also contributed to the dip. Core retail sales fell 0.2 percent in January, largely due to a 2.5 percent decline in the category.
Supermarkets and other grocery retailers (excluding convenience stores) fell 3.4 percent, while beer, wine and liquor retailers declined 2.0 percent.
Sales at sporting goods, hobby, musical instrument, book, and miscellaneous retailers were also down 2.2 percent.
In contrast, sales rose in some areas. Furniture, home furnishings, electronics and appliances retailers posted a 3.0 percent increase.
Gasoline stations and fuel vendors saw a 3.2 percent rise in January—their fourth straight monthly gain. In volume terms, those sales rose 0.1 percent.
Retail e-commerce sales declined 0.9 percent to $4.2bn in January, representing 6.1 percent of total retail trade.
Regionally, Quebec reported the largest provincial drop at 2.7 percent, after a 3.8 percent increase in December. In the Montréal CMA, retail sales were down 1.0 percent.
Ontario’s retail sales decreased 0.9 percent, led by auto sector weakness, with Toronto CMA sales falling 1.7 percent. Saskatchewan posted the strongest growth, with sales up 2.7 percent, also led by gains at motor vehicle and parts dealers.
As reported by Bloomberg, Benjamin Reitzes, rates and macro strategist at Bank of Montreal, stated there was “lots of noise here from the tax holiday” and noted, “We’ll need to see how the spring shapes up to get a better read on consumer spending. However, the plunge in sentiment on tariff fears doesn’t bode well.”
Statistics Canada also provided an advance estimate for February, indicating a further 0.4 percent decline in retail sales.
The early estimate is based on responses from 61.9 percent of surveyed businesses, compared to a 12-month average final response rate of 87.9 percent. No further details were given about the February breakdown.
According to Financial Post, despite the Bank of Canada cutting interest rates for the seventh consecutive meeting, Canadians remain concerned about job security and personal finances.
Survey data suggested consumers plan to spend more cautiously amid ongoing pressures from the US-Canada tariff environment.
