Canadian retail sales rebound in August as gains in auto sector offset weakness

Investing.com -- Retail sales in Canada rose by 1.0% to $70.4 billion in August, marking a rebound from July’s contraction, Statistics Canada data revealed Friday. The increase, driven by higher activity in motor vehicle and parts sales, was observed across six of nine subsectors and came alongside a 1.0% gain in volume terms.

Core retail sales, excluding gasoline stations and fuel vendors as well as motor vehicle and parts dealers—also advanced 1.1% in August. Gains were concentrated in general merchandise and clothing-related categories, pointing to a broad if selective consumer strength following a sluggish summer.

Motor vehicle and parts dealers led August’s upswing with a 1.8% gain, the third straight month of growth, as new car dealers posted a 2.3% rise in sales. In contrast, sales at gasoline stations and fuel vendors continued to weigh on overall figures, declining 2.0% and 2.6% in value and volume terms, respectively.

Consumer activity picked up in several discretionary spending categories, with clothing, accessories, and related goods retailers seeing a 3.2% increase. General merchandise stores also contributed to the trend, with sales up 2.4%, while home and garden-related sales slipped 0.3%, reflecting ongoing weakness in housing-adjacent sectors.

Provincially, sales rose in five provinces, with Ontario and Quebec leading the way. Ontario posted a 1.2% gain in August, driven by stronger vehicle sales, while Quebec’s 1.8% increase marked its third consecutive monthly rise—led by a 2.3% boost in Montréal’s metropolitan area.

Retail e-commerce sales nudged higher by 0.1% to $4.3 billion, maintaining 6.1% of total retail trade as consumer preference for digital shopping stabilized. Still, e-commerce’s share dipped slightly from 6.2% in July, suggesting a steadying in online demand post-pandemic.

An early estimate from Statistics Canada indicates the momentum may not carry into September, with a projected 0.7% decline in retail sales.

“Canadian retail sales continued their 2025 rollercoaster ride,” said CIBC economist Andrew Grantham. “The 1.0% increase in headline sales during August was in line with consensus expectations and the advance estimate, although largely just made up for a 0.7% decline in the prior month.”

Grantham also noted that “auto sales contributed to the August advance, although that was offset by a decline in the other often volatile segment of gasoline stations,” adding that core sales led by clothing stores helped underpin the overall recovery. However, he cautioned that beyond the monthly fluctuations, “retail sales volumes have been broadly flat since December, pointing to generally soft consumer sentiment amid US tariff uncertainty and a weaker labour market.”