Canadian Retail Sales See Slight Increase After January Dip

Canadian retail sales rose 0.1% in February after declining 0.3% the previous month, according to early estimates from Statistics Canada. The increase helped offset some of the drop at the start of the year but showed continued softness in consumer spending.

January saw lower sales across major categories like automobiles, food and beverage, and clothing. Excluding auto sales, retail sales rose 0.5% that month, led by gains in sporting goods and building materials. However, Statistics Canada noted part of the strength was due to reversals from December weakness in some sectors.

The data highlights challenges for Canadian consumers as interest rates rise and inflation remains elevated. While spending is not collapsing, growth is stalling on both monthly and annual bases. Regional figures showed declines in British Columbia, Alberta, Saskatchewan and Quebec, with the sole provincial increase in Ontario.

Core Spending Holds Steady

Core retail sales, which strip out volatile gas station and motor vehicle sales, rose 0.4% in January. This measure provides insight into underlying consumer demand and showed spending was relatively resilient among necessity items. Going forward, analysts expect Canadians will increasingly prioritize essentials over discretionary purchases.

Statistics Canada’s preliminary February estimate was based on 58.5% of companies surveyed, well below the typical final response rate of 88.1%. Further details on monthly breakdowns were not provided. The report overall signals consumers are contending with high prices and borrowing costs, impacting the momentum of retail sales growth. While no sharp decline is evident, officials at the Bank of Canada will closely monitor spending data as they consider easing monetary policy.