- Florence Jean-Jacobs
Principal Economist
Economic News
Canada: Retail Sales Fell Again in February but May Perk Up in March
April 25, 2025
Highlights
- Retail sales dropped by 0.4% m/m in February, in line with Statistics Canada’s flash estimate and the consensus of economists. The table below summarizes key data points.
- In volume terms, retail sales fell for a second consecutive month, dropping by 0.4%. Real retail sales fell in three of the last four months (graph 1).
- Purchases at motor vehicle and parts dealerships slumped again by 2.6% month-to-month. The end of electric vehicle rebates was probably a contributing factor, as planned purchases were likely moved forward to the end of 2024.
- Sales at gasoline stations inched up by 0.3% m/m, thanks to higher volumes, as seasonally-adjusted prices were down.
- Core retail sales, which exclude gasoline and autos, edged up by 0.2%, driven by a rebound in purchases at food and beverage retailers (+2.8%, following a 2.5% drop in January). In contrast, sales of furniture, electronics and appliances fell 2.9%, erasing the prior month’s gain.
- Seven provinces experienced decreases in retail sales, led by Quebec.
- Statistics Canada’s advance indicator for March points to a 0.7% advance. This appears to be driven by a rebound in volumes, as seasonally-adjusted goods prices edged down (-0.2%). If March’s flash proves correct, the first quarter of 2025 will see overall positive growth of about 1.1% q/q compared to Q4. Still, this would be slower than the quarterly growth posted in the last two quarters of 2024 (1.4% and 2.4%, respectively).
Implications
Canadians were cautious with their spending in the first two months of the year. In a month that was marked by US tariff announcements aimed at Canada (February 1), their subsequent pause (February 3), and a sharp drop in Canadian consumer confidence in the face of uncertainty, it is no surprise that retail sales fell in February. But the picture was nuanced: five of nine subsectors posted growth, with a notable bump at grocery stores. Core sales beat expectations by a wide margin, and the flash estimate for March is surprisingly positive.
Still, with US tariffs on Canadian goods taking effect in March, the attendant economic uncertainty and financial market volatility put a damper on consumer confidence in the month (graph 2). Yet some consumers may have wanted to avoid an anticipated rise in prices of imported goods, with the trade war clearly escalating. This, and a rebound in auto sales after two months of sharp contractions, might explain March’s positive advance indicator. One important caveat to this strength: since retail sales include online sales made by Canadian-based retailers, any potential drop in online purchases from US retailers would not be reflected in the data.
In all, as with other Canadian economic data like exports and GDP, retail sales look likely to advance in the first quarter. After today’s release, our tracking for annualized real GDP growth in Q1 is roughly in line with Bank of Canada’s latest Monetary Policy Report forecast of 1.8%. After taking a pause in April, we expect the Bank to pursue monetary easing by reducing its policy rate at its next meeting on June 4. (See our Economic and Financial Outlook External link. published today.)