Canada's retail sector suffers May pullback amid auto weakness, trade strains
Volume-adjusted sales, which strip out the effects of inflation, shrank by 1.4% in May after climbing 0.5% the month prior. Core retail sales, which exclude motor vehicle and parts dealers and gas stations, were mostly unchanged, after edging up 0.1% in April, suggesting a deceleration in consumer momentum.
Motor vehicle and parts dealers recorded the steepest decline among major categories, tumbling 3.6% in May, following strong gains in both March and April. The subsector's downturn was led by a 4.6% drop in sales from new car dealers, marking their first monthly decrease since February, while auto parts and tire retailers rose 1.7%.
Gasoline station and fuel vendor sales fell 1.4% in value and 2.1% in volume, continuing a three-month slide. Meanwhile, core retail subsectors posted a mixed performance, with building material and garden supply stores gaining 1.9% and health and personal care retailers up 0.7%, though food and beverage stores fell 1.2%, weighed down by a 2.9% drop at liquor outlets.
The retail sector also continued to feel the strain of heightened trade tensions between Canada and the United States, with 32% of businesses surveyed in May reporting noticeable impacts, down from 36% in April, but still significant. According to Statistics Canada, the most common effects cited by respondents included higher input costs, shifting product demand, and increases in shipping and labor expenses.
Regionally, retail sales declined in nine provinces, with Ontario posting the largest fall at 2.1%, led by weak auto sales. Nova Scotia was the only province to see a gain, up 0.3%, bolstered by stronger demand at building supply and garden equipment retailers.
E-commerce mirrored the broader pullback, as online retail sales declined 1.7% to $4.3 billion in May, making up 6.2% of total retail trade, compared to 6.3% in April. In April, the sector had fared better, with overall retail sales rising 0.3% and growth reported in six out of nine subsectors.
While official figures for June are not yet available, Statistics Canada's advance estimate suggests a rebound in the making, with a preliminary uptick of 1.6% projected. The agency noted, however, that this estimate is based on just over half of survey responses and will be revised as more comprehensive data becomes available.
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