Author: Norud Al Malis
(Bloomberg) – Canadian retail sales edged up in the third quarter as shoppers continued to flock to auto dealerships as U.S. tariffs on the auto industry continued.
Overall retailers’ revenue fell 0.7 per cent in September, according to Thursday’s advance estimate from Statistics Canada. The decline followed a 1% gain in August, which was in line with expectations of economists polled by Bloomberg.
The data showed growth of 0.3% between July and September, following a 0.4% gain in the second quarter, suggesting consumers remained resilient even as President Donald Trump’s trade war hammered the Canadian labor market.
Sales rose in six of nine subsectors in August, led by higher sales at auto and parts dealers. Excluding automobiles, retail sales rose 0.7%.
Canadian consumers are rushing to buy cars this year as Trump threatens to impose steep tariffs on U.S. imports
In the first eight months of this year, motor vehicle sales increased by 8.2% year-on-year, higher than the total retail sales of consumer goods. Auto revenue will exceed retail sales in every month of 2025 except February.
A recent Bank of Canada survey of consumers showed Canadians’ inflation expectations for autos rose sharply in the third quarter, matching levels seen after supply chain issues pushed up prices in the wake of the Covid-19 pandemic.
Despite higher-than-expected inflation data this week, overnight swaps traders are increasingly expecting the Bank of Canada to lower its policy rate next week, with the probability of a rate cut about 80%.
Headline inflation rose to 2.4% in September, while most core indicators were warming. But economists have largely dismissed the data, arguing that price growth is restrained enough to allow officials to provide more relief to the struggling economy.
“The recent rise in inflation, combined with the resilience of consumer spending, means a rate cut at next week’s meeting is far from done,” Charles St-Arnaud, chief economist at the Bank of Alberta, said in an email.
“However, with growth expected to remain weak and the extent of economic weakness remaining important, we believe the Bank of Canada will choose to cut interest rates by 25 basis points.”
Last month, the Bank of Canada cut interest rates for the first time in six months to stimulate economic growth but provided no clues about future interest rate trends.
A summary of the central bank’s deliberations released earlier this month showed it was considering keeping policy rates on hold amid strong consumption.
Despite the overall economic contraction in the second quarter, household consumption increased by 4.5% despite stagnant population growth.
Bank of Canada Governor Tiff Macklem told reporters last week that he expected strong consumption to ease. Employment rose by 60,400 last month, only partially reversing a loss of more than 100,000 jobs in the previous two months, and the labor market is expected to remain weak.
The central bank’s third-quarter consumer survey found Canadians’ willingness to spend has improved, driven by affluent consumers such as homeowners and seniors. For the less affluent, including young people and those with high school degrees, willingness to spend declined.
Regionally, Thursday’s data showed retail sales rose in five provinces in August. Increased sales at motor vehicle and parts dealers helped Ontario post the largest increase in the province in dollar terms.
From a sales perspective, sales also increased by 1% that month.
—With help from Mario Baker Ramirez.
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Last modified: October 23, 2025
