Canada: Retail Sales Rebound in January, Continue to Rise in February 

Retail sales rose 1.1% month-on-month (m/m) in January, coming in below Statistics Canada’s advance estimate of 1.5%.

In real terms, sales volumes increased 1.0% m/m, suggesting the gain was largely driven by higher activity rather than prices.

Auto sales rebounded, rising 2.0% m/m, driven by new car dealers (+2.5% m/m), marking the first increase in three months.

Receipts at gasoline stations and fuel vendors declined 0.4% m/m in both nominal and volume terms, pointing to weaker demand.

Core retail sales—excluding motor vehicles and gasoline—also strengthened, rising 0.9% m/m and starting the year on firmer footing.

• Gains were led by general merchandise retailers (+3.0% m/m), miscellaneous store retailers (+3.0% m/m), health and personal care stores (+1.2% m/m), and sporting goods and hobby stores (+1.0% m/m).
• The main laggard was food and beverage stores (-0.6% m/m), with declines also evident in real terms, suggesting softer demand.

Retail e-commerce sales rose 1.5% m/m in January.

Looking ahead, Statistics Canada’s advance estimate points to a further 0.9% m/m increase in February.

Key Implications

Consumers loosened their purse strings to start the year, with retail sales rising in January and early indications pointing to continued demand in February. Momentum in services spending appears intact, based on our internal credit and debit card data, likely supported by higher-income households with greater financial buffers. This keeps our outlook for Q1 real consumption growth at a relatively healthy 1.1% (quarter-on-quarter, annualized).

That said, the retail report is inherently backward-looking and, in this case, feels particularly in the rear-view day by day. New headwinds – from higher prices at the pump to financial market volatility – risk weighing on demand through both higher costs and a potential reversal of wealth effects.