Retail sales declined 0.7% month-on-month (m/m) in September, matching Statistics Canada’s advanced estimate.
After adjusting for inflation, the volume of retail sales dropped 0.8% m/m.
Auto sales were the key swing factor in September, falling 2.9% m/m.
Receipts at gas stations and fuel vendors rose for the first time in three months, up 1.9% m/m, though this was driven by higher gasoline prices –Â volumes were down 1.0% m/m.
Core sales – excluding auto sales and receipts at gas stations – were flat on the month. Softness was concentrated in building material & garden equipment dealers (-2.0% m/m) and general merchandise retailers (-0.5% m/m), which pulled sales lower. Gains at food and beverage stores (+0.8% m/m) and miscellaneous store retailers (+1.8% m/m) offset the weakness.
E-commerce sales declined by 3.5% m/m in September, but August was revised up to +0.6% from -0.1% m/m.
Statistics Canada’s advanced estimate points to a flat reading in October.
Key Implications
Retail sales are heading into the holiday season on shaky footing. September recorded a renewed decline, and early signals point to a flat reading in October. Despite recent volatility, the underlying trend is weaker real spending with major categories now in outright contraction. Some good news comes from our internal credit and debit card data, which continues to point to relatively healthy gains in services spending, especially travel and recreation.
We expect real personal spending growth to drift to a below-trend pace in the second half of 2025, with Q3 consumption tracking in a flat to 0.5% range. At this stage, the Bank of Canada has largely priced in this softer demand profile, giving policymakers sufficient justification to remain on hold.
