Canada: Retail Sales Bounced Back in August, Pointing to a Resilient Q3

Retail sales bounced back in August, pointing to a resilient Q3.

• Retail sales rose 1.2% month-on-month (m/m) in August, only slightly below Statistics Canada’s advance estimate for 1.3%.
• Sales were equally strong in volume terms, up 1.2% m/m.
• Sales at motor vehicle and parts dealers rebounded by 1.2% m/m, following a decline in July. New car dealers drove the increase with sales rising 1.5% m/m.
• Receipts at gasoline stations and fuel vendors rose 1.7% m/m. In volume terms, however, sales declined by 0.5% m/m, suggesting the headline gain was largely driven by prices.
• Core retail sales, which exclude autos and gasoline stations, rose 1.1% m/m. Food and beverage stores (+1.1% m/m) and general merchandise stores (+1.0% m/m) led the gains, both recovering from last month’s steep decline.
• Retail e-commerce sales continued to exhibit their typical volatility, rebounding by 1.1% m/m following a 1.9% decline in July.
• Statistics Canada’s advance estimate points to a relatively strong 0.7% m/m increase in September.

Key Implications

• August’s solid rebound, coupled with September’s encouraging flash estimate, put Q3 retail sales on track to grow by 4.0% in nominal terms (quarter-on-quarter, annualized). This is consistent with our internal TD Spend data, which points to firm spending on both goods and services.
• Today’s report reinforces our view that Canadian households retain the capacity to spend, supported by accumulated wealth and resilient income growth. The latest Canadian Survey of Consumer Expectations offers a similar, albeit mixed, signal: consumers’ perceptions of their financial health improved, even as spending intentions weakened. Putting greater emphasis on the hard data, we expect real personal consumption expenditure to grow by 2.6% annualized in Q3 2026. From there, consumers are likely to take spending down a notch, with growth expected to moderate toward year-end.