OTTAWA – Retail sales declined by 0.6% in January, amounting to $69.4 billion, as the auto sector experienced weaker performance.
Consumer spending pulled back more than anticipated after a strong December, reflecting a cautious start to the year, economist Maria Solovieva noted. She suggested that part of the drop may be linked to the federal government’s temporary tax relief, which contributed to lower prices.
Sales at motor vehicle and parts retailers shrank by 2.6%, with new car dealerships seeing a 3.2% drop. Businesses selling automotive parts, accessories, and tires also faced a 2.8% decline. In contrast, used car dealers reported a 1.6% increase in sales.
Excluding gas stations, fuel suppliers, and automotive-related businesses, core retail sales slipped by 0.2% in January. The decline was largely driven by weaker demand at food and beverage retailers, particularly supermarkets and grocery stores. Alcohol retailers also reported lower sales, further weighing down overall figures.
Economist Katherine Judge described the slowdown as part of a return to more typical spending levels rather than a major cause for concern. However, uncertainties surrounding tariffs could prompt consumers to remain cautious, potentially leading to more restrained spending in the coming months.
Solovieva emphasized that many shoppers may continue to limit purchases until they have a clearer picture of job stability, income trends, and inflation. TD analysts project a 2.7% annualized growth rate in consumer spending for the first quarter, though they foresee the possibility of a decline in later quarters.
Internal data from TD’s credit and debit card transactions indicate a modest decline in spending through the first quarter. While some consumers might stock up on goods before tariffs take effect in March, Solovieva believes any sales bump will likely be short-lived.
In terms of volume, total retail sales fell by 1.1% in January.
Preliminary estimates for February suggest an additional 0.4% decline in retail sales, though these figures remain subject to revision.
