Canadian Retail Sales (May 2025)

Retail sales plunge as auto sales pull-back in May

• Retail sales contracted by 1.1% month-on-month (m/m) in May, matching Statistics Canada's advanced estimate.
• After adjusting for inflation, the volume of retail sales declined 1.4% m/m.
• The sharp pull-back was led by auto sales, which fell by 3.6% m/m as the tariff-driven front-loading seen in the prior two months reversed course. Ex-autos, sales were down 0.2%.
• Receipts at gas stations and fuel vendors plunged by -2.7%, reflecting the second consecutive monthly decline in fuel prices due to the removal of the consumer carbon tax.
• Excluding auto sales and receipts at gas stations, core retail sales were flat in May. Sales at food and beverage stores – the biggest contributor to core sales – declined by 1.2% m/m in May.  Most other categories rose, with building material and garden equipment and supplies dealers leading with 1.9% gain.
• E-commerce sales declined by 1.7% m/m in May. 
• Statistics Canada's advanced estimate suggests a rebound in June, with a gain of 1.6%.

Key Implications

• The two-month surge in auto sales came to an abrupt halt in May. While we expect some rebound in June, the reversal will likely be limited. Core sales activity remains soft. On a real per capita basis – a metric that gained attention last year as a recession signal when adjusted for rapid population growth – sales are now in contraction for the second straight month.
• Consumer caution remains the dominant theme. Despite some recovery in traditional confidence measures, Canadians appear to be treading carefully as they assess the impact of tariffs. The Bank of Canada’s new sentiment index declined in Q2, weighed down by soft consumer spending data. Similarly, our internal Spend data suggests only a weak recovery in June, with quarterly momentum still muted. This persistent weakness in household demand will weigh on growth in the second quarter.    

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