Canadian retail sales are expected to decline in July, signaling a slowdown in household spending after a weak second quarter. A preliminary estimate from Statistics Canada showed retail receipts falling 0.8% in July, compared with a 1.5% jump in June. Overall, retail sales rose just 0.4% in the second quarter, much slower than the 1.1% increase in the first quarter of this year.
The slowdown was the weakest quarterly performance since mid-2024, reflecting consumer caution amid economic uncertainty and tariffs. It was also likely influenced by a slowdown in immigration, following new restrictions imposed by the Canadian government. In June, the increase in sales was driven by the food, beverage and clothing sectors, with all subsectors posting growth.
Excluding motor vehicles, retail sales rose 1.9% in June, beating economists’ median forecast. However, core sales excluding gas stations and car dealerships grew just 0.9% in the second quarter, down from 1.8% in the first quarter. In volume terms, overall retail sales rose 1.5% in June, with six of the ten provinces posting increases. Toronto recorded a 3.9% month-on-month jump.
The data highlighted a slowing trend in household spending, despite the Bank of Canada having made a series of interest rate cuts since June. The central bank has kept the lending rate at 2.75% for three consecutive meetings, while weighing the economic weakness against continued core inflationary pressures. The impact of the trade war has so far been limited to sectors dependent on US demand, with 27% of retailers reporting an impact in June, down from 32% in May, mainly through price increases, changes in product demand and supply chain delays.
