Canadian retail sales slip in September amid auto sector weakness

Investing.com -- Canada’s retail sector posted a modest retreat in September, according to data released Friday by Statistics Canada, signaling a broader cooling in consumer activity heading into the final quarter of 2025. Retail sales declined 0.7% to $69.8 billion for the month, with volume sales down 0.8%, underscoring softness in real purchasing power as inflation-adjusted figures also turned negative.

Motor vehicle and parts dealers were the main drag, falling 2.9%, their first decline after two monthly gains, as new vehicle sales tumbled 3.6%. In contrast, gasoline stations and fuel vendors recorded a 1.9% sales uptick, though volumes still fell 1.0%, reflecting higher pump prices rather than increased consumption.

Core retail sales, which strip out volatile components such as autos and fuel, were largely flat after rising 1.1% in August. Gains in food and beverage retailers, including a 3.4% surge from beer, wine and liquor vendors, were outweighed by drops at building material and garden suppliers and general merchandise stores.

Regionally, six of ten provinces experienced sales downturns, with Ontario leading in both magnitude and impact. The province saw a 1.2% dip in September, driven chiefly by sagging auto sales, while Toronto’s retail activity shrank by 2.3%, continuing a sluggish trend in Canada’s largest metropolitan market.

British Columbia also registered a pullback, with sales down 0.9%, largely due to falling receipts from home and garden outlets. However, Nova Scotia stood out as a regional bright spot, posting a 1.5% gain fueled by motor vehicle and parts sales growth.

Online sales extended their decline as Canadian retail e-commerce fell 3.5% to $4.1 billion in September, comprising just 5.9% of total retail trade versus 6.1% the prior month. The data indicates consumers may be pulling back across both digital and physical channels amid elevated borrowing costs and inflation fatigue.

CIBC economist Andrew Grantham noted, “Canadian retail sales fell as expected in September, and advance data suggested there was no rebound to be seen in October.” He added, “Core sales (ex auto and gasoline) were little changed on the month, with gains in sporting goods and food stores offset by declines in building equipment and clothing.”

Looking ahead, preliminary figures from Statistics Canada point to flat retail sales in October, based on survey responses from just over half of targeted businesses. While subject to revision, the early signals reinforce expectations that consumer spending will remain sluggish, supporting market predictions that the Bank of Canada will pause further interest rate hikes in December.

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