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Economic News

Canada: consumers Defy Headwinds in May

July 23, 2026
Florence Jean-Jacobs
Principal Economist

Highlights

  • Retail sales grew by 1.0% m/m in May, in line with Statistics Canada’s earlier flash estimate and the survey of economic forecasters.
  • Growth was broad-based, with all nine subsectors posting advances, and all but one province registering gains. See table for details.
  • Nominal sales at fuel vendors, up 3.1%, were buoyed by higher prices, compensating for falling volumes.
  • Sales at motor vehicle dealerships, up 0.7%, posted a second consecutive monthly gain. Excluding automotive retailers, sales grew at a solid pace of 1.2%.
  • Core sales, which exclude autos and gasoline, were up 0.9% in May, after two consecutive monthly decreases.
  • Excluding price growth, retail sales volumes inched up 0.3%, reversing the prior two months’ declining trend (graph).
  • Statistics Canada’s advance indicator points to a 0.4% increase in June. Given the decline in seasonally adjusted CPI goods that month, this implies a solid advance in volumes (upwards of 1%). If that proves correct, real retail sales growth could reach 0.9% q/q annualized in Q2 2026, following the 5.4% bounce in Q1.

 

Implications

Despite the surge in gasoline prices caused by the conflict in the Middle East since March, Canadian consumers look like they remained on a fairly solid footing through the second quarter.

Despite consumer confidence reaching a trough in May, purchases of motor vehicles advanced for a second consecutive month. Consumers adjusted to higher gas prices by putting fewer litres in the tank, leaving some room for other retail purchases. With gas prices easing in June, and other helpful boosts like job gains in the last two months, and the one-time payment of the Canada Groceries and Essentials Benefit External link. for eligible Canadians on June 5, the second quarter is looking better than initially anticipated.

Looking ahead, we will continue to monitor these positive factors against ongoing headwinds, including trade uncertainty (and potential new tariffs External link. that could affect investments and the labour market), the volatile situation in the Strait of Hormuz, and slowing population growth.

After today’s release, we are forecasting Q2 GDP growth broadly in line with the Bank of Canada’s assessment (2.5% annualized) published in its July Monetary Policy Report. We continue to believe that the Bank will remain on the sidelines for the remainder of the year.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.