Consumers cut spending for second month as core retail sales fall 0.2 percent in January
Statistics Canada reported that Canadian retail sales fell 0.6 percent to $69.4bn in January.
This marked the first back-to-back decrease since mid-2023 and followed a 2.6 percent spike in December, when the federal government paused sales tax on select items.
The largest contributor to the January decline was a 2.6 percent drop in motor vehicle and parts dealers.
New car dealers fell 3.2 percent and automotive parts, accessories and tire retailers dropped 2.8 percent. Used car dealers were the only segment in the subsector to post gains, rising 1.6 percent.
Bloomberg reported that consumer spending softened for a second month amid trade war concerns and the unwinding of tax-driven purchases.
According to Benjamin Reitzes, rates and macro strategist at Bank of Montreal, there was “lots of noise here from the tax holiday,” adding that “we’ll need to see how the spring shapes up to get a better read on consumer spending.”
He noted that “the plunge in sentiment on tariff fears doesn’t bode well.”
Core retail sales—which exclude gasoline stations, fuel vendors, and motor vehicle and parts dealers—dropped 0.2 percent in January, after rising 2.7 percent in December.
Statistics Canada said the decline was primarily due to a 2.5 percent decrease at food and beverage retailers.
Supermarkets and other grocery stores (excluding convenience retailers) were down 3.4 percent, while beer, wine and liquor retailers dropped 2.0 percent.
Sales at sporting goods, hobby, musical instrument, book, and miscellaneous retailers also fell 2.2 percent.
Retail e-commerce sales declined 0.9 percent to $4.2bn, accounting for 6.1 percent of total retail trade on a seasonally adjusted basis.
In volume terms, retail sales fell 1.1 percent in January—marking the largest drop in two years.
According to Katherine Judge, economist at Canadian Imperial Bank of Commerce, “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 federal tax pause ran from December 14 to February 15 and applied to select purchases, including alcohol, books, and games.
While most subsectors declined, furniture, home furnishings, electronics and appliances retailers recorded a 3.0 percent increase—the strongest gain in core retail categories.
Gasoline stations and fuel vendors also posted a fourth consecutive increase, up 3.2 percent in dollar terms and 0.1 percent in volume terms.
Regionally, retail sales dropped in Quebec, Ontario, and Manitoba. Quebec saw the steepest fall, down 2.7 percent, following a 3.8 percent increase in December.
Sales in the Montréal census metropolitan area declined 1.0 percent. Ontario experienced a 0.9 percent decrease, largely due to lower motor vehicle and parts sales, while Toronto saw a 1.7 percent drop.
Saskatchewan posted the largest provincial gain at 2.7 percent, led by higher sales in the motor vehicle and parts category.
The Financial Post noted that despite seven consecutive interest rate cuts by the Bank of Canada, household spending remained subdued.
Its surveys indicated growing concern among Canadians about job security and personal finances, contributing to reduced consumer activity.
Statistics Canada’s advance estimate suggests retail sales declined 0.4 percent in February. This early estimate was based on responses from 61.9 percent of surveyed companies and is subject to revision.
The average final response rate for the past 12 months was 87.9 percent. The agency did not provide further detail on the February estimate.
