Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Retail sales declined in September, as expected, and reversed some of the increase seen the previous month. The decrease was mainly due to lower sales at motor vehicles and parts dealers. According to the preliminary estimate, retail sales were flat in October. This suggests that retail sales grew 0.2% q-o-q in Q3. However, in volume, they decreased 0.3% q-o-q, suggesting some drag on growth from retail sales in Q3.
Retail sales per person, adjusted for inflation, decreased 1.0% m-o-m in September to their lowest level since November 2024 and have been volatile so far this year. We estimate that retail sales, adjusted for inflation and population growth, eased 0.4% compared to the same month last year. This decline in mainly due to lower motor vehicle sales, as core retail sales adjusted for population and inflation are 0.8% y-o-y higher.
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 end of 2025, providing some much-needed support to growth and offsetting some of the weakness in business investment and exports. However, with retail sales growing faster than income, the resilience in consumer spending is mostly driven by a reduction in the household saving rate.
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 depends on the labour market. However, with the labour market expected to remain 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 declined 0.7% m-o-m in September, in line with expectations, and followed an increase in the previous month. Compared to the same month last year, retail sales rose 3.4% y-o-y. Statistics Canada also reports that retail sales are estimated to have been flat in October, based on a preliminary estimate. With this, retails sales in 2025Q3 are estimated to have increased by 0.2% q-o-q.
Monthly sales were down in only six of the nine subsectors. The biggest declines were in spending at motor vehicles and parts dealers (-2.9% m-o-m), building material and garden centres (-2.0% m-o-m), clothing, footwear and accessories stores (-0.7$ m-o-m), and general merchandise stores (-0.5% m-o-m). These declines were partly offset by increases in spending at gasoline stations (+1.9% m-o-m), sporting goods, hobby, books and other stores (+1.6% m-o-m), and at food retailers (+0.8% m-o-m).
Core retail sales, which exclude motor vehicles and parts and gasoline stations, were unchanged in September (+4.1% y-o-y).
In volume terms (i.e. adjusted for inflation), retail sales declined 0.8% in September (+2.5% y-o-y). Core retail sales are estimated to have eased 0.2% m-o-m (+2.5% y-o-y). Retail sales volumes have decreased 0.3% q-o-q in 2025Q3.
At the regional level, headline retail sales decreased in five provinces. The most significant declines were in New Brunswick (-2.6% m-o-m), Ontario (-1.2% m-o-m), Saskatchewan (-1.0% m-o-m), and BC (-0.9% m-o-m). Retail sales increased the most in Nova Scotia (+1.5% m-o-m), PEI (+1.2% m-o-m), and Manitoba (+1.7% m-o-m).
Focusing on the y-o-y changes, the value of retail sales increased in all provinces, led by BC (+4.4% y-o-y), Quebec (+4.2% y-o-y), Nova Scotia (+3.6% y-o-y), and Ontario (+3.3% y-o-y). They increased the least in Newfoundland (+0.1% y-o-y), Saskatchewan (+0.3% y-o-y), PEI (+1.8% y-o-y), and New Brunswick (+2.2% 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 Newfoundland (+8.2% y-o-y), Saskatchewan (+6.7% y-o-y), Manitoba (+5.7% y-o-y), and Ontario (+5.5% y-o-y).
In volume terms, we estimate retail sales increased in most provinces, except in Newfoundland (-2.1% y-o-y), Saskatchewan (-1.9% y-o-y), and PEI (-0.3% y-o-y). They increased the most in BC (+2.2% y-o-y), Manitoba (+1.9% y-o-y), Quebec (+1.9% y-o-y), and Nova scotia (+1.4% m-o-m).
In Alberta, retail sales rose 0.1% m-o-m in September (+2.5% y-o-y). According to our estimates of the seasonally-adjusted details, there were higher sales at building material and garden centres, motor vehicles and parts dealers, and motor vehicles and parts dealers. On the flip side, sales declined at clothing, footwear and accessories stores, gasoline stations, and general merchandise stores.
We estimate that core retail sales decreased by 1.8% m-o-m (+4.9% y-o-y) in September. Although there are no official volume details at the provincial level, we estimate retail sales volumes in the province declined by 1.7% y-o-y in September.
Statistics Canada also releases retail sales numbers for Calgary and Edmonton. The data shows robust growth, with retail sales increasing in Calgary (+4.9% y-o-y), Edmonton (+4.4% y-o-y) than in the rest of the province (+7.3% y-o-y).
The core measure shows some regional disparity, with modest sales in Edmonton (+1.7% y-o-y), while Calgary saw gains (+7.2% y-o-y), but the rest of the province grew strongly (+17.1% y-o-y).
Looking for more? Subscribe now to receive Economic updates right to your inbox here!
Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.