Canadian Retail Sales (January 2025)

Retail sales edge lower in January ahead of the looming tariff storm

• Retail sales declined by 0.6% month-on-month (m/m) in January, following December's outsized gain of 2.6% (previously reported as 2.5%). The result came in below the Statistics Canada's advanced estimate of 0.4%.
• After adjusting for inflation, the volume of retail sales posted a sizeable decline of 1.1% m/m in January.
• A big part of the weakness came from sales at motor vehicle and parts dealers, which dropped 2.6% m/m, reversing all of December's 1.8% gain. Ex-autos, sales rose 0.2% m/m, outperforming the consensus call for a 0.2% decline.
• Receipts at gas stations and fuel vendors rose 3.2% m/m in nominal terms. This was largely due to higher prices, as volumes growth was negligible at just 0.1% m/m.
• Excluding auto sales and receipts at gas stations, core retail sales declined 0.2% m/m in January. The weakness was driven primarily by a 2.5% drop in food and beverage stores. 
• Gains in other categories – furniture and home furnishings stores (+3.9% m/m), building material & garden equipment dealers (+1.6% m/m), health and personal care stores (+1.2% m/m), and general merchandise stores (+0.9% m/m) – were not enough to offset the losses.
• E-commerce sales fell 0.9% m/m in January, following a 2.9% gain in December. 
• Statistics Canada's advanced estimate for February points to another decline in sales of 0.4% m/m.

Key Implications

• Consumers tightened their belts to start the year with retail sales retreating more than expected in January after a strong showing in December. Since sales are reported in nominal terms, part of the decline may reflect a temporary drop in prices due to the HST/GST holiday. However, the pullback was even more pronounced in real terms.
• Looking ahead, uncertainty looms. Our internal credit and debit card statistics points to a slight softening in spending through the first quarter, consistent with today's reading and the advance estimate for February. While there may be some stockpiling ahead of tariffs in March any boost would likely be short-lived. Consumers remain cautious and may restrain spending further until there is more clarity on the outlook for jobs, incomes and prices. We've penciled in a 2.7% (annualized) growth in consumer spending for Q1, and potentially a contraction in the following quarters (see QEF).    

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