Last Friday, Statistics Canada (StatsCan) announced that Canadian retail sales grew for a second straight month in February. This comes ahead of rising geopolitical tensions in the Middle East. Now, Canadians are facing more risks with the conflict in the Middle East pushing up energy prices and raising economic uncertainty, which has lowered consumer confidence. The conflict in the Middle East began right at the end of February and has continued into April. There is uncertainty about the conflict’s mid- to long-term impact on consumer prices and global economic activity.

• Retail sales in Canada rose by 0.7% in February over the previous month, which was down from January and missed economists’ expectations of 0.9%, based on a Bloomberg survey. Still, it points to another relatively strong month for retail sales, which could benefit Canada’s economic growth for the first quarter of 2026.
• February’s increase was driven by a rise in sales at motor vehicles and parts dealers. Sales at general merchandise retailers also increased at a robust pace over the month.
• Looking ahead, StatsCan estimated that retail sales rose by 0.6% in March. This would mark the third straight month of growth and point to consumer spending positively contributing to economic growth in the first quarter of 2026.
• Despite the relatively strong results at the start of 2026, uncertainty looms, which could weigh on spending in the months to come. Inflationary pressures picked up in March and could intensify, which could cut into Canadian consumers’ discretionary spending.

Ahead of the conflict in the Mideast, Canadians continued to spend, despite lingering and unresolved trade tensions with the US. Canada, the US and Mexico are at the table discussing trade as part of the review of the Canada-United States-Mexico Agreement. The conflict in the Middle East persists, and the end is unclear after scheduled US-Iran peace talks over the weekend were cancelled.

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