Canadian retail activity cooled in December, with a rebound expected in January

Investing.com - Canada’s retail sales declined 0.4% to CAD 70 billion in December, as consumers reduced large-item purchases during the holiday season. This decline was mainly driven by a 1.6% drop in auto and auto parts dealer sales, marking the second consecutive month of contraction in new car showrooms.

Core retail sales (excluding volatile sectors like autos and fuel) fell 0.3% after a strong increase in November. The weakness was primarily concentrated in building materials and home furnishings, which saw sales plunge 4.0% and 1.7%, respectively.

Despite the cooling at year-end, broader data for 2025 indicates Canadian consumers remain resilient, with total annual sales rising 4.0% to CAD 837.2 billion. The annual growth was led by the auto sector, which, despite a decline at year-end, still saw sales increase 4.7%.

Regional differences were notable, with Alberta experiencing the largest provincial decline of 2.1% due to weak auto demand. In contrast, Quebec defied the national trend, growing 0.6%, becoming a rare bright spot amid a generally sluggish month.

Digital commerce continued to drive growth, with seasonally adjusted e-commerce sales jumping 3.6% to CAD 4.3 billion in December. Online transactions now account for 6.1% of total retail trade, up from 5.8% the previous month.

Looking ahead, early data suggests the December decline was a temporary pause rather than a long-term downturn. Statistics Canada’s preliminary estimates indicate retail sales could increase 1.5% in January.

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