Stronger retail spending hinted at resilience as households braced for higher housing costs
Statistics Canada data showed retail sales up 1.1% in January to $70.7 billion, led by a 2% gain at motor vehicle and parts dealers.
Core retail sales – excluding gas stations and motor vehicle and parts dealers – rose 0.9%, while volumes climbed 1%. Food and beverage retailers saw a 0.6% drop, with supermarket sales down 0.7%.
Alberta led in dollar terms with a 3.5% gain, again powered by motor vehicle and parts dealers. Ontario posted a 0.9% rise, with the Toronto census metropolitan area up 0.6%. Quebec's retail sales advanced 0.6%, while Montréal saw a 1.7% increase.
Andrew Grantham, senior economist at CIBC, framed the retail rebound as a sign that monetary easing has begun to filter through.
“A solid start to the year for retail sales could be evidence that last year's interest rate cuts, combined with the slight reduction in unemployment since mid-2025, is supporting an upturn in consumer sentiment and spending,” he said.
Mortgage renewals and household budgets
Michael Davenport, senior Canada economist at Oxford Economics, the latest data point to a firmer‑than‑expected start to the year. But he warned that “a shrinking population, deteriorating labour market, and more mortgage renewals at higher interest rates will likely keep consumer outlays subdued in the near term.”
Davenport also said the energy price shock tied to the US/Israel-Iran war would squeeze households this spring, even if some temporarily drew down savings to maintain spending. He pointed to the coming federal grocery and essentials benefit as a modest buffer for real incomes in the second quarter.
Tailwind for GDP, mixed signal for housing
Capital Economics economist Bradley Saunders viewed the advance estimate for February’s retail sales – a 0.9% gain – as broadly consistent with recent improvements in consumer confidence, arguing that household spending would be a tailwind for GDP growth in the first quarter.
“That said, with gas prices headed for $2 a litre, the hit to households’ purchasing power could crush real consumption in the second quarter,” he said.
The much‑discussed “mortgage cliff” has eased as rate cuts and lower fixed rates took hold, even as roughly three‑quarters of outstanding mortgages are scheduled to renew by the end of 2026. In that context, January’s retail numbers suggest that many households still have room to spend – at least for now.
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