Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Retail sales rose in August, as expected, and reversed the declines seen the previous month. The increase was mainly due to strong sales at motor vehicles and parts dealers. According to the preliminary estimate, retail sales eased by 0.7% m-o-m in September. This suggests that retail sales grew 0.3% q-o-q in Q3, after +0.4% q-o-q in Q2.
Retail sales per person, adjusted for inflation, increased 0.9% m-o-m in August, and have been relatively stable since the Spring, albeit volatile. We estimate retail sales adjusted for inflation and population growth rose 1.3% compared to the same month last year. Most of the improvements were not the result of higher motor vehicle sales, as core retail sales adjusted for population and inflation are 2.5% 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 likely 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 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 rose 1.0% m-o-m in August, following a decrease in the previous month. Compared to the same month last year, retail sales rose 4.9% y-o-y. Statistics Canada also reports that retail sales are estimated to have decreased 0.7% m-o-m in September, based on a preliminary estimate.
Monthly sales were up in six of the nine subsectors. The largest increases were in spending on clothing, footwear and accessories (+3.2% m-o-m), general merchandise retailers (+2.4% m-o-m), motor vehicles and parts (+1.8% m-o-m), furniture, electronics and appliances (+1.2% m-o-m), and health and personal care store (+1.2% m-o-m). These increases were partly offset by lower sales of gasoline stations (-2.0% m-o-m).
Core retail sales, which exclude motor vehicles and parts and gasoline stations, rose 1.1% m-o-m in August (+5.9% y-o-y).
In volume terms (i.e. adjusted for inflation), retail sales grew 1.0% in August (+3.1% y-o-y). Core retail sales are estimated to have increased 1.0% m-o-m (+4.4% y-o-y).
At the regional level, headline retail sales increased in five provinces. The most significant increases were in Newfoundland (+5.1% m-o-m), New Brunswick (+2.2% m-o-m), Quebec (+1.8% m-o-m), Ontario (+1.2% m-o-m), and Alberta (+0.8% m-o-m). Retail sales decreased the most in PEI (+0.9% m-o-m), Manitoba (+0.6% m-o-m), Nova Scotia (-1.0% 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 (-1.0% y-o-y), and Nova Scotia (-0.5% 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 (+7.1% y-o-y), Quebec (+5.6% y-o-y),Ontario (+5.4% y-o-y), Saskatchewan (+5.4% y-o-y), BC (+4.8% y-o-y), and New Brunswick (+4.6% y-o-y).
In volume terms, we estimate retail sales increased in five provinces out of eight, led by Newfoundland (+5.1% y-o-y), New Brunswick (+2.2% y-o-y), Quebec (+1.7% y-o-y), Ontario (+1.1% y-o-y), and Alberta (+0.7% y-o-y). They decreased in PEI (-1.1%), Nova Scotia (-0.6%), Manitoba (-0.2%), and Saskatchewan (-0.1%).
In Alberta, retail sales rose 0.8% m-o-m in August (+5.4% y-o-y). According to our estimates of the seasonally-adjusted details, there were higher sales at general merchandise stores, gasoline stations, clothing and footwear stores, and food and beverage retailers. On the flip side, sales declined at motor vehicles and parts dealers, building material and garden centres, and health and personal care stores.
We estimate that core retail sales increased by 3.3% m-o-m (+2.5% y-o-y) in August. Although there are no official volume details at the provincial level, we estimate retail sales volumes in the province rose by 0.7% y-o-y in August.
Statistics Canada also releases retail sales numbers for Calgary and Edmonton. The data shows that growth in the metropolitan areas continued to underperform compared to the rest of the province. As such, retail sales grew more modestly in Calgary (+2.3% y-o-y), Edmonton (+4.0% y-o-y) than in the rest of the province (+5.6% y-o-y).
The core measure also shows some regional disparity, with sales lower in Edmonton (-0.4% y-o-y), while Calgary saw gains (+35.3% y-o-y), but the rest of the province grew strongly (+14.8% y-o-y).
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Independent Opinion
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