Last Friday, Statistics Canada (StatsCan) reported that Canadian retail sales jumped higher in January, while estimating another robust increase in February. The results suggest that Canadian consumer spending has been relatively resilient to begin 2026, but this could be strained if inflationary pressures accelerate in response to higher energy prices. Energy prices have soared to multi-year highs amid tensions in the Middle East. However, there was some encouraging news from US President Donald Trump that suggested the end of the conflict could be nearing.

• Retail sales in Canada rose by 1.1% in January, rebounding from the 0.4% decline in December 2025. January’s increase came in just below the 1.5% rise StatsCan had estimated. This was only the second increase in the last five months.
• Sales increased for motor vehicles and parts, at general merchandise retailers and sporting goods. Conversely, sales at gasoline stations declined slightly over January.
• Looking ahead, StatsCan estimated that retail sales grew by 0.9% in February.
• The outlook for retail sales is clouded in response to the conflict in the Middle East and a slower labour market in recent months.
• Trump said there have been productive talks between the US and Iran to end the conflict in the Middle East, which prompted Trump to postpone threatened attacks on Iranian energy infrastructure. However, an Iranian news agency said there has been no communication with the US.

Canadian consumer spending appeared to be strong before tensions in the Middle East escalated. The conflict between the US-Israel and Iran has pushed up oil prices, which could add to inflationary pressures, clouding the outlook for consumer spending. Yesterday, investors were hopeful that talks between the two sides are taking place and are progressing towards ending the conflict. The price of oil moved lower, while the S&P/TSX Composite Index delivered a strong gain yesterday.

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