Canadian retail sales slipped in July even as economists point to signs of a robust rebound in August, extending a pattern of consumer resilience despite an ongoing trade dispute with the United States and global energy price shocks.
Statistics Canada reported Thursday that retail sales fell 0.7 per cent month-over-month to $73.7 billion in July. However, the agency’s flash estimate for August points to a 1.3 per cent increase, suggesting a sharp turnaround heading into the fall.
Michael Davenport, senior economist at Oxford Economics, said the July decline was not unexpected and matched most analysts’ forecasts. He said the more notable figure was the August flash estimate, which indicates a strong rebound in retail activity.
“When we take that flash estimate for August into consideration, it looks like consumer spending in the third quarter overall remained fairly resilient given the global oil price shock, elevated uncertainty and all the other headwinds that continue to face the Canadian consumer,” Davenport said.
He added that the anticipated August rebound reflects an underlying trend of steady growth in retail sales, noting his team believes actual sales volumes may have received an even stronger boost than StatCan’s estimate suggests.
A ‘Strong Canadian Economy’ Story
Sébastien Mc Mahon, chief economist at iA Financial Group, said the strength and broad-based growth expected in third-quarter sales continue a trend seen throughout 2026.
“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.
Mc Mahon pointed to trade as a key factor behind his optimism, noting that exports of goods to markets outside the United States are accelerating, which he said signals that Canada’s push to diversify its economy is showing results.
“Canada’s economy, it’s not firing on all cylinders, there are some challenges, but you do see data that is much better than what we could have expected when we were doing our forecasts in early 2025 … so, there are some reasons for optimism,” he said.
Headwinds Still Loom
Despite the resilience shown by Canadian shoppers so far, Davenport cautioned that signs of weakness are likely to emerge in the coming months as a range of economic pressures continues to weigh on the country.
“We think (it’s all) going to combine to lead to a little bit of slower growth in consumer spending,” he said.
He added that while a contraction in spending isn’t expected in the near term, a deceleration from the healthy pace seen earlier in 2026 is likely.
Canadian Retail Sales: July Actual vs. August Flash Estimate
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