Canada’s retail sales increased by 0.3% in April to $70.11 billion, according to Statistics Canada. The increase was driven by customers advancing purchases to counter tariffs, with sales growing in six of the nine sub-sectors, despite falling below estimates. Preliminary figures for May Retail sales are however pointing to a contraction of 1.1 per cent.
“Canadian consumers continued to spend in April, but a decline in the May advance estimate for retail sales provides another indication that the economy is heading for a stall in Q2,” Andrew Grantham, senior economist at CIBC Capital Markets wrote in a note.
“That renewed consumer caution amid tariff uncertainty and a weakening labour market is likely to persist for a little while yet, and we continue to expect two more 25 (basis point) interest rate cuts by the Bank of Canada in the second half of the year to help support a recovery,” he said.
Maria Solovieva, an economist at TD Bank, had a similar outlook for May, adding that they set a “sombre tone” for the second quarter.
“In addition, our internal credit and debit card spending data shows a meaningful softening in spending through May, suggesting that consumers tightened their purse strings,” Solovieva said in a note to clients Friday.
“As a result, we expect real personal consumption expenditures to be flat this quarter, with consumer spending likely to contract in Q3 if U.S. tariffs continue to weigh on sentiment and job prospects.”
Statistics Canada reported that feedback from respondents for April highlighted the effects of trade tensions between Canada and the United States on Canadian retail businesses.
According to answers to supplementary questions, 36% of retail businesses were impacted by the trade tensions in April.
“Despite six of nine subsectors posting monthly gains in retail sales, all nine subsectors saw a negative impact on sales,” it said.
The biggest jump in sales in April came from sales at motor vehicle and parts dealers, registering a growth of 1.9 per cent, and was led by sales at new car dealers and used car dealers.
This is the biggest category of sales and contributes over a quarter of total retail sales.
Sales at sporting goods, hobby, musical instrument, book, and miscellaneous retailers rose one per cent, while furniture, home furnishings, electronics and appliances retailers gained 0.8 per cent. Sales at clothing, clothing accessories, shoes, jewelry, luggage and leather goods retailers fell 2.2 per cent.
The biggest drop in sales came from gasoline stations and fuel vendors which shrank by 2.7 per cent and were closely followed by sales at retailers selling clothing and accessories posting a drop of 2.2 per cent.
In volume terms, retail sales increased 0.5 per cent in April.
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