Canada’s January Retail Sales Shrink by 0.6%; February Sales Likely to Fall 0.4%

Retail sales in Canada fell 0.6% to $69.4 billion in January, with the auto sector experiencing a largest drop in sales figure. This decline is likely due to the price-drop effect of the federal government’s tax holiday. Motor vehicle and parts dealers saw a 2.6% drop in sales, while new-car dealers saw a 3.2% drop. Automotive parts, accessories, and tire retailers saw a 2.8% decline. Used-car dealers reported a 1.6% increase. 

Building material and garden equipment and supplies dealers saw a 1.6% increase from December 2024 to January 2025 ($3,866M to $3,927M), with a 0.5% year over year increase ($3,908M to $3,927M). 

Core retail sales, which exclude gasoline stations and fuel vendors, fell 0.2% in January. The decline was mainly driven by lower sales at food and beverage retailers, particularly supermarkets and grocery stores. CIBC economist Katherine Judge believes the weakness is a sign of normalization, but uncertainty over tariffs may make consumers more cautious in the coming months, slowing spending. 

TD is forecasting a 2.7% annualized growth in consumer spending for the first quarter, with potential contraction in the following quarters. Overall retail sales fell 1.1% in January. Statistics Canada’s preliminary estimate for February suggests a 0.4% decrease in retail sales, though the figure is expected to be revised.

Source: Globe and Mail
Source: The Star
Source: Statistics Canada

Canada’s Economy Got Hot in January, but Statistics Canada Points to February Chill

The Canadian economy experienced a strong start in January, but early signs suggest growth stalled in February due to harsh winter weather and the threat of tariffs. 

Statistics Canada reported that real GDP rose 0.4% in January, but flash estimates for February suggest flat growth for the month. Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, said that January’s growth was driven largely by a boom in the oil and gas, quarrying, and mining industries, while retail trade faced a contraction.

The manufacturing, utilities, and construction sectors recorded growth in January, while the services side of the economy edged up 0.1%. Upticks in manufacturing and oil and gas extraction over the past two months align with a boost in Canadian exports to the U.S., which are hit by tariffs. Andrew Grantham, senior economist at CIBC, said that the February slowdowns are likely tied to harsh winter weather throughout Canada and the end of Ottawa’s sales tax holiday mid-month.

Bank of Canada surveys suggest confidence among consumers and businesses is dropping sharply in the face of tariffs, which DiCapua said is expected to weigh on spending and investment in the months ahead, hampering growth beyond the impact of the tariffs themselves. U.S. President Donald Trump kicked off the trade war with Canada in early March with a round of blanket tariffs on Canadian goods, followed by 25% tariffs on steel and aluminum entering the U.S. and has threatened a round of widespread “reciprocal” tariffs as of April 2.

Ontario Premier Doug Ford suggested that some Canadian-made cars could land an exemption if they use mostly American parts. Prime Minister Mark Carney said that Canada must “fundamentally reimagine our economy” and the era of tight trade integration with the U.S. has ended. DiCapua said there are some sectors where Canada may be able to “ramp up manufacturing” to soften the blow of the trade war, but that will be a tall task for the automotive industry and others with deep ties to the U.S.

Source: The Star
Source: Globe and Mail
Source: Financial Post
Source: Statistics Canada