Canadian Retail Sales (August 2025)

Retail sales rebound in August, but September flash estimate points to a decline

• Retail sales rose 1.0% month-on-month (m/m) in August, matching Statistics Canada's advanced estimate.
• After adjusting for inflation, the volume of retail sales increased 1.0% m/m.
• The gain was led by auto sales, with sales up 1.8% m/m, driven by a 2.3% surge at new car dealers.
• Receipts at gas stations and fuel vendors fell 2.0%, reflecting both lower gasoline prices and softer demand, with volumes down 2.6% m/m.
• Core sales – excluding auto sales and receipts at gas stations – were solid, rising 1.1% m/m in August after a 1.2% m/m decline in July. General merchandise retailers contributed the most to the gain (+2.4% m/m), while clothing and clothing accessories stores also posted strong growth (+3.2% m/m).
• The weakest categories were furniture and home furnishings stores (-1.6% m/m) and miscellaneous store retailers (-1.4% m/m).
• E-commerce sales slowed, edging up just 0.1% m/m in August. 
• Statistics Canada's advanced estimate points to a decline of 0.7% in September.

Key Implications

• Retail sales data continues to exhibit volatility, with monthly figures alternating between declines and gains. As a result, nominal sales are currently tracking at an annualized rate of 1.2% for the quarter. The composition suggests that consumers favoured discretionary retail spending. At the same time, our internal data on credit and debit card spending shows relatively healthy gains in discretionary services categories such as travel, which rebounded sharply in Q3 after contracting in the previous quarter. Although part of this strength likely reflects higher prices.
• Taken together, the notable slow-down in durable goods spending, particularly autos, suggests real personal spending growth should drift to a below trend rate in the second half of 2025.  This should give the Bank of Canada further reason to emphasize economic slack, despite September's unexpected uptick in inflation.    

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