- Nom du rédacteur
- Florence Jean-Jacobs
Principal Economist
Economic News
Retail Sales Took a Break in July, But Probably Rebounded in August
September 24, 2026
Highlights
- Retail sales contracted by 0.7% m/m in July, one tick better than Statistics Canada’s earlier flash estimate and the survey of economic forecasters (-0.8%).
- The weakness was broad-based, with eight of nine subsectors declining, including the weightier categories of automotive and gasoline retailers. However, the provincial picture shows disparities. See table for details.
- Nominal sales at fuel vendors were down 0.9% in July, masking an even sharper decline in volumes, given that seasonally adjusted gas prices were up from June.
- Sales at motor vehicle dealerships were down 0.8%, after fourth monthly gains. The 1.3% decline at new car dealerships more than offset the 2.9% advance for the smaller category of used cars.
- Core sales, which exclude autos and gasoline, were down 0.7%, led by general merchandise retailers (-1.9%). The latter had, however, advanced the month prior by a heady 2.5%, likely linked to FIFA World Cup External link. related expenditures in June. Receipts of clothing and accessories also contracted in July, while gardening and building materials continued to prove resilient.
- Excluding price growth, retail sales volumes fell by 1.1%, but that only partially reversed the prior month’s notable advance (graph).
- Moreover, Statistics Canada’s advance indicator for August points to a solid 1.3% increase. With seasonally adjusted CPI goods edging down that month, this implies an advance in retail volumes close to 1.5% in August.
Implications
All good things come to an end. After six consecutive months of advance, nominal retail sales contracted in July. Several factors are at play.
Large swings in gas prices have been influencing consumer demand and receipts at fuel retailers since the spring and continue to do so. With prices rising at the pump in July, motorists chose to put fewer litres in the tank. And their cautiousness stretched to other spending categories that month. We’ll be watching closely developments in the Middle East, as intensification of the conflict could delay the return to normal for oil and gas prices.
Despite an upbeat Q2 for retail sales, consumer surveys continue to suggest that Canadians are being cautious with their finances, given the level of global and trade uncertainty affecting energy prices, inflation and economic prospects. Nearly 60% think it’s a bad time to make a major outlay for things such as a home or a car (Signal49 Research External link.). Indeed, new car sales were down month-to-month in July.
Some counteracting factors likely helped soften the decline in July. The federal government raised the GST/HST credit (the new Groceries and Essentials Benefit) for eligible households in July, after an additional one-time payment in June. This could explain the lesser decline in the food and beverage category in July (-0.1%).
After today’s release, we continue to expect Q3 real GDP growth to slow to about 1.0% annualized, after a stronger Q2 (3.3%) (see our latest forecast External link. for details).
With upside risks to inflation but downside risks weighing on the economy (trade uncertainty, slowing population growth), the Bank of Canada will be navigating an uneven outlook in the coming months. We continue to believe that the Bank will remain on the sidelines for the remainder of the year, waiting until Q1 2027 to raise its policy rate.