Economy

Retail sales slip 0.7% in July as fuel costs squeeze shoppers, but August looks stronger

Sales fell to $73.7 billion in July, with declines in eight of nine subsectors, though a Statistics Canada flash estimate points to a 1.3% rebound in August.

By John Wilson · September 24, 2026

Canadian shoppers pulled back in July. Statistics Canada reported Thursday that retail sales fell 0.7% to $73.7 billion, down from $74.25 billion in June, with lower sales in eight of nine subsectors. In volume terms, which strip out price changes, sales dropped 1.1%.

The decline was marginally smaller than economists expected; Wealth Professional put the consensus at a 0.8% drop. And the agency's advance estimate suggests sales bounced back by 1.3% in August.

Where the weakness was

Core retail sales, excluding gas stations and auto dealers: -0.7%, after +1.2% in June
General merchandise retailers: -1.9%, after +2.5% in June, the biggest drag
Clothing, shoes, jewelry and accessories: lower
Motor vehicle and parts dealers: -0.8%, the first decline in four months; used car dealers rose 2.9%
Gas stations and fuel vendors: -0.9% in dollars and -3.5% in volume
Building material and garden supplies: +0.8%, the only core gain and a fourth straight monthly increase
E-commerce: -3.5% to $5.5 billion, or 7.5% of total retail

Regional picture

Sales fell in five provinces. Ontario posted the largest decline in dollar terms, led by general merchandise, with sales in the Toronto area down 4.7%. British Columbia fell 1.4%, with Vancouver down 1.6%. Alberta was the standout, with sales up 1.4%.

What's behind it

Higher energy prices are the main suspect. Andrew Hencic, a senior economist at TD Economics, said fuel costs eroded consumer purchasing power in July, while households were also squeezed by grocery, housing and transportation costs. Headline inflation rose to 3% in July from 2.8% in June as gasoline prices climbed with renewed hostilities in the Middle East.

Retail sales are an early indicator of GDP and account for about 40% of consumer spending, Reuters noted, so a soft month feeds directly into third-quarter growth estimates.

A dip, or the start of a slide?

Many economists treated July as a pause rather than a turn. Michael Davenport of Oxford Economics told BNN Bloomberg the decline was “not all that surprising” and pointed to the strong August flash estimate. The flash figure, however, is based on responses from only 57.8% of companies surveyed, against an average final response rate of 87.1%, so it can be revised significantly.

Others are more cautious. Katherine Judge of CIBC Capital Markets wrote that lingering trade uncertainty will likely weigh on discretionary spending, and that a sustained pickup may not come until 2027. In her view, that also means the Bank of Canada will not raise rates in the near term.

What it means for households and investors

For households, July's numbers reflect a familiar trade-off: when fuel takes a bigger bite, discretionary purchases are the first to give. Reviewing a budget for categories that have quietly grown, such as fuel and groceries, can help. For investors, retail data is noisy month to month; a single weak print says little about individual retailers, whose results depend on their own margins and customer mix. This is general information, not personalized advice.

Sources

General news and information, not individualized financial advice. Figures reflect the publication date.