Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Retail sales declined in July, as expected. The decrease was broad-based with most subsectors lower on the month. The lower retail sales followed a robust increase in June. The preliminary estimate for August suggests that retail sales rose by 1.0% m-o-m, likely pushing retail sales to their highest level this year.
Retail sales per person, adjusted for inflation, declined by 1.0% m-o-m in July, and have been relatively stable so far this year, albeit volatile. We estimate retail sales adjusted for inflation and population growth eased by 0.6% y-o-y in July. Most of the improvement was not the result of higher motor vehicle sales, as core retail sales adjusted for population and inflation are 1.3% y-o-y higher. Alberta continues to show some significant weakness in spending per capita (-2.0% y-o-y) with continued underperformance in purchasing power, with real wages still below their 2019 level, as the culprit.
Retail sales have been quite volatile in recent months, affected by the elevated uncertainty and the drop in consumer confidence earlier this year. Nonetheless, in level terms, retail sales have been relatively stable so far this year, suggesting resilient consumer spending going into the second half of 2025 and some likely support to growth.
This is consistent with our view that the Canadian economy is no longer deteriorating, but that the path forward will remain volatile. The trajectory of consumer spending in the coming months will depend on the labour market. However, with further increases in the unemployment rate likely as the labour market remains tepid, any improvement in retail sales over the next few months will be modest. The main risk to the Canadian economic outlook remains further deterioration in the labour market, leading to significant job losses.
Retail sales fell 0.8% m-o-m in July, following an increase in the previous month. Compared to the same month last year, retail sales rose 4.0% y-o-y. Statistics Canada also reports that retail sales are estimated to have increased 1.0% m-o-m in August, based on a preliminary estimate.
Monthly sales were down in eight of the nine subsectors. The largest decreases were in spending on clothing, footwear and accessories (-2.9% m-o-m), building materials and garden centers (-2.1% m-o-m), food and beverage retailers (-1.3% m-o-m), sporting goods, hobby, books and others (-1.2% m-o-m), and gasoline stations (-0.9% m-o-m). These increases were partly offset by higher sales of motor vehicles and parts (+0.2% m-o-m).
Core retail sales, which exclude motor vehicles and parts and gasoline stations, fell to -1.2% m-o-m in July (+4.5% y-o-y).
In volume terms (i.e. adjusted for inflation), retail sales dropped 0.8% in July (+2.7% y-o-y). Core retail sales are estimated to have decreased 1.4% m-o-m (+3.4% y-o-y).
At the regional level, headline retail sales decreased in five provinces. The most significant decreases were in Newfoundland (-8.8% m-o-m), Ontario (-1.6% m-o-m), New Brunswick (-1.2% m-o-m), BC (-0.8% m-o-m), and Alberta (-0.1% m-o-m). Retail sales increased the most in PEI (+0.9% m-o-m), Manitoba (+0.6% m-o-m), Nova Scotia (+0.4% m-o-m), and Quebec (+0.2% m-o-m).
Focusing on the y-o-y changes, the value of retail sales increased in most provinces, led by BC (+7.6% y-o-y), PEI (+5.6% y-o-y), Ontario (+4.6% y-o-y), New Brunswick (+4.4% y-o-y), Manitoba (+4.2% y-o-y), and Nova Scotia (+3.6% y-o-y). They decreased in Newfoundland (-4.7% y-o-y), and Saskatchewan (-0.4% y-o-y).
Looking at the value of core retail sales, they are also higher compared to last year in all provinces, with the biggest increases in Saskatchewan (+6.7% y-o-y), New Brunswick (+6.7% y-o-y), Quebec (+6.7% y-o-y), BC (+6.4% y-o-y), Ontario (+6.1% y-o-y), and Newfoundland (+5.3% y-o-y).
In volume terms, we estimate retail sales increased in most provinces, led by BC (+6.3% y-o-y), PEI (+4.2% y-o-y), Ontario (+3.3% y-o-y), New Brunswick (+3.1% y-o-y), and Manitoba (+2.9% y-o-y).
In Alberta, retail sales eased 0.1% m-o-m in July (+2.7% y-o-y). decreases in sales at general merchandise stores, sporting goods, hobby, books stores, and clothing and footwear stores were the main drag. On the flip side, strong sales at motor vehicles and parts dealers and building material and garden centres push sales higher.
As a result, we estimate that core retail sales decreased by 2.7% m-o-m (+0.5% y-o-y) in July. Although there are no official volume details at the provincial level, we estimate retail sales volumes in the province rose by 0.5% y-o-y in June.
Statistics Canada also releases retail sales numbers for Calgary and Edmonton. The data shows that growth in the metropolitan areas underperformed compared to the rest of the province. As such, retail sales grew more mildly in Calgary (+1.1% y-o-y), Edmonton (+1.3% y-o-y) than in the rest of the province (+6.3% y-o-y).
The core measure also shows some regional disparity, with sales lower in Edmonton (-2.1% y-o-y), while Calgary saw modest gains (+3.1% y-o-y) but the rest of the province grew strongly (+11.4% y-o-y).
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Independent Opinion
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