Last Friday, Statistics Canada (StatsCan) reported that retail sales increased in April, driven by an increase in sales of motor vehicles. However, StatsCan estimated that retail sales dropped sharply in May. Trade and economic uncertainty have pushed down consumer confidence this year, which has weighed on spending. May’s data could be telling the story of struggling Canadian households. Here’s more from the retail sales report.

• Retail sales in Canada rose by 0.3% in April, falling just short of the 0.4% increase economists had expected, based on a Bloomberg survey. This was the second straight increase after falling in January and February.
• April’s increase was driven by a 1.9% increase in sales for motor vehicles and parts. This came as purchasers tried to get ahead of extensive automotive tariffs from the US. Meanwhile, sales fell at gasoline stations, and food and beverage sales were largely unchanged. Excluding automotive, retail sales dropped by 0.3%, the second consecutive decline.
• Looking ahead, StatsCan estimated that retail sales fell by 1.1% in May, which would be the largest decline since March 2023.
• Canadian consumers appear to be reining in spending amid concerns about the economy, trade and the labour market. Escalating tensions in the Middle East have added to concerns about the global economy and prices.

Prevailing uncertainty in the domestic and global economies is weighing on Canadian consumer sentiment. Spending appears to be pulling back in response. Canada’s economy is expected to weaken in the second quarter as trade tensions persist, despite Canadian and US leaders trying to reach a trade agreement. Canada’s economy expanded in the first quarter of 2025, but this was mainly due to a rise in exports ahead of tariffs.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.