OTTAWA--Canadian spending, which has helped underpin a sluggish economy, stalled last month and snapped a run of rising retail trade through the first half of 2026.
The value of retail trade in the country rose a stronger-than-expected 0.6% in June from the month before to a seasonally adjusted 74.28 billion Canadian dollars, the equivalent of about US$53.87 billion, Statistics Canada said Friday.
Yet an early tally of receipts indicates sales in July declined 0.8%, the first drop since the end of 2025. Sales growth in March, April and May was revised slightly higher.
The data agency offered no detail with its July estimate, which was based on responses from more than half of retailers surveyed, though it coincides with a fresh spike in fuel costs with the Iran conflict and with lingering worries about the fallout of U.S. tariffs.
Analysis of cardholder activity by Royal Bank of Canada, the country's largest lender, showed that consumers continued to spend through what was a challenging quarter, likely drawing on savings or taking on debt amid higher energy costs and weak wage gains. It found purchases of essentials excluding fuel grew for the period, while cardholder spending on discretionary goods recovered after a weak year and a half.
"While consumers showed up in June, a weak July flash highlights the risks they face in keeping up momentum amid trade- and war-driven uncertainty," said Shelly Kaushik, senior economist at Bank of Montreal Capital Markets.
In volume terms, retail sales rose 1.5% between June and July and were 2.1% higher than a year earlier. With factory and wholesale volumes also up solidly for the month, economists say monthly gross domestic product is tracking stronger than Statistics Canada's earlier estimate of 0.2% growth.
Sales in June were up in seven of the nine industry segments the data agency tracks, led by general merchandise stores, which includes super centers, warehouse clubs and the country's few remaining department stores. Compared with the same month last year, nominal sales were up 5.2% overall in June.
Consumers also bought more at clothing, accessories, shoe, luggage and leather goods stores during the month.
The monthly advance, which was a touch stronger than the 0.4% growth economists had expected, came despite a drag from gasoline stations and fuel vendors where receipts fell for the first time in four months as prices retreated. Stripping out fuel, retail sales in Canada rose 1.2% for the month.
Core sales, which exclude fuel as well as motor vehicles and parts, were up a third month running. The sole decrease in core sales was at food and drink retailers, a segment led by supermarkets and other grocery stores.
Canada's economy was growing in recent months and industry-level data points to an annualized expansion of 3.4% in the second quarter, which would be the strongest in roughly three years and follows back-to-back quarterly contractions. The housing market and resale activity have picked up after faltering earlier in the year, jobs data shows a recovery in hiring, and surveys indicate businesses are adapting to a trade environment of uncertainty and U.S. tariffs.
The Bank of Canada, which has left its policy interest rate unchanged six times in a row and is widely expected to do so again early next month, has noted the economy is showing signs of broadening from a reliance on household and government spending as exports pick up and businesses adapt to U.S. trade policy.
"Monthly retail sales data can be very volatile, and even after factoring in July's decline the underlying trend in sales volumes appears to be positive," said Andrew Grantham, senior economist at CIBC Capital Markets. "Looking ahead to 2027, there are reasons to be cautiously optimistic regarding the consumer spending outlook, including the recent improvement seen in the labor market, expanded benefits for lower income households and a reduced drag on disposable incomes from mortgage refinances."