- Retail sales declined 0.7% month-on-month (m/m) in July, a notch above Statistics Canada’s advance estimate.
- In volume terms, retail sales fell by a stronger 1.1% m/m, pointing to somewhat weaker underlying demand.
- Motor vehicle and parts dealers posted their first decline in four months, with sales falling 0.8% m/m, driven by a reversal at new car dealers (-1.3% m/m).
- Receipts at gasoline stations and fuel vendors declined 0.9% m/m. In volume terms, sales were down a more sizeable 3.5% m/m.
- Core sales – excluding autos and gasoline stations – fell 0.7% m/m. General merchandise stores led the decline (-1.9% m/m), while losses across other categories were relatively modest.
- Building material, garden equipment & supplies dealers (+0.8% m/m) was the only major category to record a gain.
- Retail e-commerce sales declined 3.5% m/m, partially reversing a strong increase in June.
- Statistics Canada’s advance estimate points to a 1.3% m/m rebound in August.
Key Implications
- Some reversal was in the cards following an exceptionally strong second quarter. With a rebound indicated for August, nominal retail sales are tracking roughly flat in Q3. This is consistent with our TD Spend data, where goods spending is also tracking flat, while services outlays are firmly in growth territory.
- Having seen three consecutive quarters of real consumption growth above 2%, we believe households have the capacity to spend, supported by accumulated wealth and savings as the most difficult phase of the mortgage renewal cycle recedes. We expect some moderation rather than a retrenchment, with real personal consumption expenditure forecast to grow 2.6% annualized in Q3 2026.
