Canadian retail sales declined in July, but likely rebounded robustly in August, continuing a macroeconomic trend of consumer resilience in the face of an ongoing trade war with the U.S. and global energy price shocks, economists say.
Statistics Canada (StatCan) said Thursday that retail sales fell 0.7 per cent month-over-month to $73.7 billion in July. But the agency also released a flash estimate predicting a 1.3 per cent increase last month.
Michael Davenport, senior economist at Oxford Economics, told BNN Bloomberg in an interview on Thursday that the dip in July was “not all that surprising,” noting that the headline figure fell in line with most expert estimates.
“Overall, I think the number that stands out is the flash estimate for August, which shows that retail sales likely rebounded quite strongly,” he said.
“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 the expected rebound in August points to an “underlying trend of steady growth in retail sales,” noting that he and his team believe there was likely an even stronger boost in overall volumes than StatCan’s estimate suggests.
‘Strong Canadian economy’
The strength and broad-based growth in sales expected in the third quarter are a continuation of a year-to-date trend in 2026, Sébastien Mc Mahon, Chief Economist at iA Financial Group, told BNN Bloomberg in an interview on Thursday.
“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,” he said.
As for what Thursday’s data reveals about the state of Canada’s economy as a whole, Mc Mahon said there are a number of reasons for optimism going forward.
“If you look at the trade front, of course it’s top of mind, we are seeing exports of goods to the rest of the world that are accelerating, so this strategy to diversify Canada’s economy seems to be working,” he said.
“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.”
Despite the resilience shown by Canadian consumers to this point, Davenport said he expects signs of weakness to start showing up in the coming months, as a long list of headwinds continues to weigh on Canada’s economy.
“We think (it’s all) going to combine to lead to a little bit of slower growth in consumer spending,” he said.
“We don’t think consumer spending is necessarily going to contract in the near term, but we do expect to see a little bit of a deceleration from the fairly health pace that we’ve seen over the first part of 2026.”
