Canada's Retail Sales Pull Back After Strong Rebound in June

Canada's retail sales pulled back 0.8% in July after a strong rebound in June, with a forecast based on 55% of retailers surveyed. Household consumption remains resilient despite trade tensions with the US. Cardholder tracking by Royal Bank of Canada found customer spending rose 1.1% during July, with a solid recovery in spending on travel and discretionary services.

Canadian retail sales experienced a decline of 0.8% in July, according to an advance estimate from Statistics Canada, following a robust 1.5% increase in June [2]. The decrease was driven by a slowdown in consumer spending, which has been resilient despite ongoing trade tensions with the United States.

The July figures, based on responses from 55% of companies surveyed, suggest a broader trend of weakening household consumption. This slowdown is attributed to elevated trade uncertainty, slowing population growth, and the impact of tariffs on certain sectors [2]. Despite significant interest rate cuts from the Bank of Canada since last June, consumer caution persists.

In June, sales across all nine subsectors showed growth, with food, beverage, and clothing retailers leading the way. Sales in volume terms increased by 1.5%, highlighting a strong recovery in certain sectors [1]. Excluding autos and parts, sales rose 1.9% in June, surpassing economist expectations [2].

The Bank of Canada's decision to hold borrowing costs at 2.75% has been a balancing act, aiming to support the economy while addressing persistently high core inflation. The trade war's impact has been limited to sectors reliant on U.S. demand, with 27% of retailers citing trade tensions in June [2].

Meanwhile, Royal Bank of Canada (RBC) reported that cardholder spending rose 1.1% during July, indicating a solid recovery in spending on travel and discretionary services. This data suggests that consumer confidence is gradually returning, albeit cautiously [4].

Canadian Prime Minister Mark Carney recently spoke with U.S. President Donald Trump, discussing trade challenges and other issues. The leaders agreed to continue negotiations, but a breakthrough on a new trade deal remains elusive [3].

In summary, while Canadian retail sales showed resilience in June, the July figures indicate a broader slowdown in consumer spending. The ongoing trade tensions with the United States and economic uncertainty continue to impact household consumption. However, signs of recovery in certain sectors, such as travel and discretionary spending, provide some optimism for the future.

References:

[1] https://www.tradingview.com/news/reuters.com,2025-08-22:newsml_SCLMJELP5:0-canada-june-retail-sales-grow-1-5-seen-down-0-8-in-july/
[2] https://financialpost.com/pmn/business-pmn/canada-consumer-spending-falters-as-july-sales-decline
[3] https://anewz.tv/world/world-news/12255/canadas-carney-spoke-to-trump-and-discussed-trade/news
[4] https://www.marketbeat.com/instant-alerts/filing-aviso-financial-inc-buys-40689-shares-of-royal-bank-of-canada-ry-2025-08-18/