In February, a modest uptick in Canada’s retail sales barely made a dent in the more significant decline witnessed at the year’s outset, hinting at a dwindling consumer spending momentum. According to preliminary figures from Statistics Canada released on Friday, retail sales inched up by 0.1% last month, coming off a 0.3% fall in January—marking the most considerable decrease since March 2023. This decline was somewhat less than the 0.4% drop forecasted in a Bloomberg poll. Retail sales, when adjusted for volume, saw a slight increase of 0.2% in the same month. The downturn in January was primarily due to reduced sales in the automotive and parts sector, alongside dips in food, beverage, and clothing sales.
When auto sales are excluded, retail sales experienced a 0.5% surge in January, surpassing the anticipated 0.4% decline. Core retail sales, which remove gas stations and auto dealers from the equation, climbed by 0.4% in January. The upturn was fueled by sales in sporting goods, hobby stores, and building materials. This improvement in core retail sales for January also came as a bounce-back from a slump in certain subsectors in December, as noted by the agency.
The data from last Friday, combined with diminishing inflation and a cooling employment market, underscores the challenges facing Canadian consumers. While the current retail sales data does not suggest a drastic downturn that would prompt the Bank of Canada to cut interest rates urgently, the stagnation in sales growth, particularly on a per capita basis, could signal a shift towards a more accommodative policy stance in the near future. Nevertheless, the impact of such tailwinds may wane over time, especially following the Trudeau administration’s recent announcement to limit the entry of temporary residents into the country.
“Today’s figures indicate that consumer spending is facing difficulties in expanding amidst higher interest rates, though it’s not in freefall,” commented Andrew Grantham, an economist at the Canadian Imperial Bank of Commerce, in an investor report.
“We’re anticipating the Bank of Canada to make its first rate cut in June.”
On a regional scale, sales dipped in British Columbia, Alberta, Saskatchewan, and Quebec, while Ontario recorded the most substantial provincial gain.
Statistics Canada has yet to provide detailed insights into the February estimates, which were derived from responses collected from 58.5% of companies surveyed. The average response rate for the survey over the past year stood at 88.1%.
