Canada retail sales rise 0.1% after January decline

A slight rebound in Canadian retail sales in February failed to offset a steeper drop at the start of the year, signaling fading momentum in consumer spending.

Receipts for retailers rose 0.1% last month, according to an advance estimate from Statistics Canada released Friday. That followed a 0.3% drop in January, the biggest decline since March 2023, compared with the median estimate of a 0.4% decrease in a Bloomberg survey. In volume terms, retail sales increased 0.2% that month.

January’s decline was led by lower sales at car and parts dealers. Sales were also down in food and beverage retailers and clothing stores.

Excluding autos, retail sales jumped 0.5% in January, higher than expectations for a 0.4% drop. Core retail sales — which exclude gas stations and car dealers — rose 0.4% in January. Sporting goods and hobby retailers, and building materials drove gains. Part of the strength in January core retail sales was due to a reversal from December weakness in some subsectors, the agency said.

Friday’s report, taken together with easing price pressures and cooling jobs market, highlights headwinds for Canada’s consumers. While there’s little evidence of a sharp decline in retail activity that would spur the Bank of Canada into urgently cutting interest rates, the stalling sales growth — especially on a per capita basis — will likely help officials pivot to easier policy in coming months.

“Spending is soft, but hanging in there with a big assist from population growth,” Benjamin Reitzes, rates and macro strategist at Bank of Montreal, said in an email.

However, that tailwind should fade over time given the Trudeau government’s announcement on Thursday that it would curb the number of temporary residents entering the country, he pointed out.

“Overall, today’s data show that consumer spending is still struggling to grow in a higher interest rate world, but is not collapsing,” Andrew Grantham, an economist at Canadian Imperial Bank of Commerce, said in a report to investors.

“We continue to expect a first rate cut from the Bank of Canada in June.”

Regionally, sales were down in British Columbia, Alberta, Saskatchewan and Quebec. Ontario, on the other hand, saw the largest provincial increase.

The statistics agency didn’t provide details on the February estimate, which was based on responses from 58.5% of companies surveyed. The average final response rate for survey over the previous 12 months was 88.1%.