Woman checking inventory in warehouse

Retail sales decline as consumers redirect their spending

  • Retail sales fell by 0.6 per cent month-over-month (m/m) in July, after posting a 4.2 per cent gain in June.
  • Looking ahead, Statistics Canada’s flash estimate for August’s retail sales suggests that sales increased by 2.1 per cent. However, this preliminary estimate is based on responses from half of the surveyed companies, so this figure will likely change.
  • Eight out of ten provinces saw retail sales fall. Prince Edward Island (–3.8 per cent) experienced the sharpest decrease, while sales rose in Ontario (+0.9 per cent). In absolute terms, Quebec accounted for 42 per cent of the decline in Canada’s retail sales.
  • Sales at gasoline stations rose +1.4 per cent due, in part, to higher gas prices. Meanwhile, sales at motor vehicle and parts dealers were up +0.4 per cent.
  • Core sales (excluding gasoline and motor vehicles) decreased by 1.3 per cent. Hobby stores (–12.4 per cent) witnessed the largest decline while clothing stores (+7.6 per cent) saw the sharpest increase.
  • Retail e-commerce sales were down 2.9 per cent from a year ago on a non-seasonally adjusted basis. E-commerce sales as a share of total retail trade sat at 4.6 per cent in July, down from 6.2 per cent in June.

Key insights:

  • The steam is fading. After public health restrictions were eased around many parts of the country in June, retailers naturally saw a boost to their sales. However, as restrictions continued to ease in July, many Canadians decided to spend on leisure activities such as travel and dining rather than on retail goods.
  • Despite the decline, retail sales were still 7.3 per cent above their pre-pandemic (February 2020) level. With income still holding up well due to government support measures and plenty of built-up savings, consumers have been willing to open their wallets when in-store shopping has been permitted.
  • Consumer spending will be the engine that drives Canada’s economic recovery throughout the remainder of the year, thanks largely to a recovering labour market and pent-up demand for in-person services. Besides, government pandemic policies have mostly moved on from shutdowns to proof-of-vaccine requirements. We believe these measures lessen the risk of another round of lockdowns, adding optimism to our latest national outlook.