Retail sales contracted by 0.4% month-on-month (m/m) in February, in line with the Statistics Canada’s advanced estimate.
After adjusting for inflation, the volume of retail sales posted a 0.4% m/m decline.
The biggest drag came from motor vehicle and parts dealers, where sales fell 2.6% m/m, building on January’s weakness. Ex-autos, sales were flat.
Receipts at gas stations and fuel vendors rose 0.3% m/m in nominal terms and 0.8% m/m in volumes terms, suggesting the increase was demand-driven.
Excluding auto sales and receipts at gas stations, core retail sales increased 0.5% m/m in February, driven primarily by a 2.5% increase at food and beverage stores. This may reflect an last minute bump in demand prior to the expiration of to the HST/GST holiday mid-February.
Gains were partially offset by a sharp contraction in furniture & home furnishings stores (-4.4% m/m), which continue to struggle amid a collapse in home sales.
E-commerce sales fell 0.3% m/m in February.
Statistics Canada’s advanced estimate for March points to a 0.7% m/m rebound.
Key Implications
Retail sales remained sluggish in February, weighed down by weaker car sales, but March data point to a bounce back, likely driven by Canadians pulling forward major purchases and stockpiling non-discretionary items ahead of incoming tariffs.
Even so, March’s rebound is expected to be short-lived. Consumers remain wary and may curb spending further until there is more certainty around employment, income prospects and inflation. The Bank of Canada’s latest consumer survey suggests that the negative sentiment in response to tariff-related fears has surpassed even that experienced during the pandemic, leading households to revise down their overall spending plans. We’ve penciled in a +2% (annualized) growth rate in consumer spending for Q1, with a contraction in the following quarters.
