Canadian Retail Sales (July 2025)

Retail sales falter in July, but rebound in August

• Retail sales contracted by 0.8% month-on-month (m/m) in July, matching Statistics Canada's advanced estimate.
• After adjusting for inflation, the volume of retail sales declined 0.8% m/m.
• Auto sales continued to grow at a modest pace, rising 0.2% m/m and providing a small offset to the headline decline.
• Receipts at gas stations and fuel vendors fell 0.9%, as gasoline prices continued to decline in July. In volumes terms, however, sales rose 0.2% m/m.
• Core sales – excluding auto sales and receipts at gas stations – fell 1.2% m/m in July.  Food and beverage stores led the decline (-2.5% m/m) despite ongoing price inflation. Sales at clothing and clothing accessories stores also retreated (-2.9% m/m), giving back some of the strong gains recorded in June. 
• The only categories to record gains were furniture and home furnishings stores (+1.0% m/m) and miscellaneous store retailers (+0.5% m/m), though neither added meaningfully to the headline.
• E-commerce sales rose by 2.2% m/m in July. 
• Statistics Canada's advanced estimate suggests that sales recovered in August, rising 1.0% m/m.

Key Implications

• Volatility in the data remains exceptionally high, however nominal sales in Q3 are now tracking 1.1% annualized growth despite July's outsized weakness. 
• Cooling employment and softer wage gains are likely to catch up with consumers in Q3, reinforcing a more frugal mindset. While wealth effects could continue to buoy services spending among higher-income households, another leg up in domestic tourism and related spending appears unlikely. Goods demand, meanwhile, looks set for a sizeable contraction, with vehicle sales likely to pull back in in the third quarter (see QEF).    

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