Canadian Retail Sales Rebound in August, Driven by Auto Sector and Discretionary Spending

Canadian retail sales saw a notable 1.0% increase in August, rising to $70.4 billion, according to data released Friday by Statistics Canada. This performance marked a decisive turnaround following a contraction in July, with the growth observed across six of nine subsectors. Significantly, the gain was matched by a 1.0% rise in volume terms, suggesting a genuine increase in goods purchased, not just higher prices.

Core Sales Show Broad Consumer Strength

The increase wasn’t solely dependent on volatile sectors. Core retail sales, which exclude the often-fluctuating figures from gasoline stations and motor vehicle and parts dealers, also advanced by a solid 1.1% in August. This strength was concentrated in general merchandise and clothing-related categories, indicating that while selective, Canadian consumer spending has picked up following a sluggish summer.

The Motor Vehicle Engine

The motor vehicle and parts dealer subsector was the primary catalyst for August’s upswing, posting a significant 1.8% gain—their third consecutive month of growth. New car dealers were the main driver, with sales climbing 2.3%.

In contrast, gasoline stations and fuel vendors continued to drag down the overall figures, with sales declining 2.0% in value and 2.6% in volume terms.

Discretionary Spending Rises

Evidence of a broader consumer appetite was clear in several discretionary spending categories. Retailers of clothing, accessories, and related goods saw a substantial 3.2% increase. Furthermore, general merchandise stores contributed to the positive trend with sales up 2.4%.

However, the recovery was not universal. Sales in home and garden-related sectors slipped 0.3%, reflecting the continued softness in areas adjacent to the housing market.

Provincial Leaders and the E-Commerce Picture

Regionally, sales improved in five provinces, led by the country’s two largest markets. Ontario posted a 1.2% gain, largely on the back of stronger vehicle sales, while Quebec’s 1.8% increase marked its third consecutive monthly rise, boosted significantly by a 2.3% jump in the Montréal metropolitan area.

Meanwhile, retail e-commerce sales edged up 0.1% to $4.3 billion, maintaining a 6.1% share of total retail trade. While the share dipped marginally from 6.2% in July, this suggests a stabilization in consumer preference for digital shopping post-pandemic.

September’s Expected Pullback

Looking ahead, an early estimate from Statistics Canada suggests the August momentum may be difficult to sustain, projecting a 0.7% decline in retail sales for September.

Commenting on the volatility, CIBC economist Andrew Grantham noted that Canadian retail sales have been on a “rollercoaster ride,” calling the 1.0% August increase “in line with consensus expectations” but largely just making up for the prior month’s decline.