Canadian retail sales dip in July, but August rebound near

Canadian retail sales declined 0.7 percent month-over-month to $73.7 billion in July. It was the first drop since December 2025, according to Statistics Canada data released September 24, 2026. 

A flash estimate points to a 1.3 percent rebound in August. Most economists say the broader consumer trend remains intact. 

Most subsectors registered losses, with eight of the nine tracked by StatCan recording a decline: 

• General merchandise retailers fell 1.9 percent after a 2.5 percent gain in June 
• Clothing, accessories, shoes, leather goods fell 1.2 percent 
• Motor vehicle and parts dealers slipped 0.8 percent 
• Gasoline stations and vendors fell 0.9 percent, and 3.5 percent in volume terms 
• Core retail sales fell 0.7 percent 

Building material and garden equipment dealers were the lone exception, up 0.8 percent. 

What does the July retail sales decline mean for client portfolios? 

Andrew Hencic, a senior economist at TD Economics, said higher energy prices eroded consumer purchasing power in July. Households were also squeezed by higher grocery, housing, and transportation costs. 

Canada's inflation rate rose to three percent in July from 2.8 percent in June. The spike was driven by gas prices tied to renewed hostilities in the Middle East. Core inflation remained anchored at the two percent target – a signal that wider price pressures have not yet taken hold. 

"Folks are feeling it. The longer elevated inflation goes on, it will start eating into disposable incomes, especially if we don't see steady and strong wage gains supported by a healthy labour market," Hencic said. 

July's result came in slightly better than analyst expectations of a 0.8 percent decline. One month does not make a trend – the August flash estimate remains the more useful signal. 

Michael Davenport, senior economist at Oxford Economics, described the July decline as "not all that surprising" in comments to BNN Bloomberg. 

"Overall, I think the number that stands out is the flash estimate for August, which shows that retail sales likely rebounded quite strongly," Davenport said. 

Sébastien Mc Mahon, chief economist at iA Financial Group, called the July pullback normal macroeconomic payback after a string of gains. 

"This is the way it goes in macro data, you have to expect some payback at some point, and we got it in July, but that doesn't change our 'strong Canadian economy' story," Mc Mahon said. 

How should advisors position against slowing Canadian consumer spending? 

Despite the August rebound, advisors should not expect momentum to hold. Katherine Judge, executive director and senior economist at CIBC Capital Markets, said sales volumes are on track to grow at roughly four percent annualized in Q3 2026. She warned that elevated gasoline prices will erode discretionary spending power in the near term. 

"It likely won't be until 2027 when we see signs of consumer spending showing a sustained pickup, and the Bank of Canada is therefore not going to hike rates in 2026," Judge wrote in a note published Thursday. 

TD Economics projects consumer spending growth of 2.6 percent annualized in Q3 2026, slowing to 1.4 percent in Q4. Section 338 tariffs, which took effect in August, are an added weight on the outlook. They are raising costs and threatening jobs in industries with US supply chain exposure. 

"When you take the totality of those things together, some drag to consumer spending is to be expected. There were some solid prints in the second and third quarters of 2026, but we expect a bit of a slowdown near the end of the year," Hencic said. 

For advisors, that deceleration warrants a careful review of consumer discretionary exposure against defensive and income-oriented holdings. Canadian retail sales data remains a useful leading indicator for domestic economic health. 

TD Economics forecasts consumer spending will slow to 1.4 percent annualized in Q4 – a figure advisors may want to keep in mind when reviewing client portfolio positioning.