- Florence Jean-Jacobs
Principal Economist
Economic News
Canada: Autos Drove Up Retail Sales in February
April 24, 2026
Highlights
- Retail sales rose by 0.7% m/m in February, below Statistics Canada’s earlier flash estimate and the survey of economic forecasters (both at 0.9%).
- Sales at motor vehicle and parts dealerships led the increase (+1.0%), with both new car and used car dealers registering advances (see table for details). Excluding autos, retail sales inched up 0.5%, well below consensus forecast (0.8%).
- Sales at gas stations were essentially flat, in both volume and nominal terms, in the month prior to turmoil in oil markets due to the conflict in the Middle East.
- Despite autos leading the increase in dollar terms, the February advance was fairly broad-based with sales in seven of nine subsectors rising. Core sales, which exclude autos and gasoline, rose 0.6%.
- Eight out of ten provinces saw retail sales rise, with notable gains in Ontario (+1.0%) and Quebec (+1.7%).
- The volume of retail sales displayed modest growth of 0.3% m/m (graph 1).
- Statistics Canada’s advance indicator points to a 0.6% increase in March. But given that goods prices grew 1.2% in the month, this implies a pullback in volumes.
Implications
Today’s retail sales release paints a picture of steady but modest growth in consumer purchases to start the year. After January’s 1.2% advance, February and March look more subdued, with the latter driven by prices rather than sales volumes. Still, if the March flash proves correct, Q1 should indicate a rebound in sales from a sluggish Q4, in both nominal and real terms (graph 2).
Under the hood of the Q1 advance, auto dealerships are gaining some momentum, helped in part by the reinstatement of federal rebates for plug in hybrid and electric vehicles as of February 16. But the expected decline in sales volumes in March is not entirely surprising: the strain on household budgets due to rising gasoline prices could well have impacted other categories of retail purchases, especially non-essential items. Moreover, Q1 was marked by a soft labour market and still elevated uncertainty, with many consumers worried for their job security, according to the latest Canadian Survey of Consumer Expectations External link..
After today’s release, we are still tracking real GDP growth of 1.8% annualized in Q1 2026, as per our latest Economic and Financial Outlook External link.. That’s in line with the Bank of Canada’s latest Q1 forecast from January. We expect further positive consumer momentum in late Q2 as the Canada Groceries and Essentials Benefit (essentially an expansion of the GST/HST credit) begins to show up in people’s bank accounts. The temporary fuel tax cut should also relieve some consumer budget strain in Q2. When considered along with still muted underlying inflation despite the spike in energy prices, we expect the Bank to remain on the sidelines next week.