- Florence Jean-Jacobs
Principal Economist
Economic News
Canadian Consumers Stay on the Sidelines to Start the Year
March 21, 2025
Highlights
- Retail sales dropped by 0.6% m/m in January, lower than Statistics Canada’s flash estimate and the consensus of economists (both at -0.4%). The table below summarizes key data points.
- In volume terms, retail sales decreased even more, by 1.1%, following a record print of 2.5% in December.
- The price-driven increase in sales at gasoline stations (+3.2%) was not enough to offset the sizeable fall at motor vehicle dealerships (-2.6%) and some other retailers.
- Core sales, which exclude gasoline and autos, fell by 0.2%, on lower sales at food and beverage retailers (-2.5%). In contrast, consumers increased purchases at furniture, home furnishings, electronics and appliances retailers (+3.0%).
- Central Canadian provinces (Quebec, Ontario, Manitoba) were the only ones to register lower retail sales in January, led by Quebec (-2.7%). Despite provincial stimulus cheques of $200 starting to be mailed out in January, Ontario saw a 0.9% drop in retail sales, led by Toronto CMA (-1.7%).
- Statistics Canada’s advance indicator for February points to a similar decline in retail sales, of -0.4% m/m. Given that goods prices were up 0.5% in February (on a seasonally adjusted basis), it appears volumes were a major drag on sales for the second consecutive month to start 2025.
Implications
Today’s release suggests that Canadians started the year more tightfisted than they ended 2024. Even if January’s contraction needs to be put in the context of December’s significant bump—helped by the start of the GST/HST holiday and imminent end of electric vehicle (EV) rebates—the fall in core sales in January points to weakness under the hood.
Moreover, February’s flash indicates another decline in retail sales. Looking forward, we expect to see further weakness in durable good purchases, led by autos, with federal EV rebates officially ending in January. The fact that the GST/HST holiday ended mid-February won’t help. Neither will the weak February jobs numbers.
The uncertainty created by tariff announcements south of the border is likely to continue to put a damper on consumer purchases in the next few months. The depreciated loonie and Canadian counter-tariffs could also discourage consumers, who will face higher prices for imported goods. And that’s in addition to the weaker consumption expected to result from slowing population growth as inflows of newcomers to Canada decline. Indeed, the only good news for consumers is that the end of the federal price on pollution External link. will bring down the price at the pump in April even as most Canadians will receive their final Canada Carbon Rebate payment in the same month.
After today’s release, we’re tracking annualized real GDP growth of roughly 1.5% q/q for Q1, slightly below the Bank of Canada’s (BoC) forecast of 2.0%. We expect the BoC to take a pause in April, but to later proceed with roughly four 25 basis point cuts throughout the year.
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NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively.
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