Retail sales fall 0.6% in January as holiday bump fades and tariff concerns grow

After a strong surge in holiday shopping, Canadian consumers eased off the spending pedal in January as economic headwinds—including ongoing tariff uncertainty—tempered demand.

Canadian retail sales slipped 0.6% down to $69.4 billion in January, following a 2.5% spike in December, reports Statistics Canada.

The biggest declines came from three of nine subsectors: motor vehicle and parts dealers (-2.6%), food and beverage retailers (-2.5%), and sporting goods, hobby, book and miscellaneous stores (-2.2%).

Notable increases were recorded at gasoline stations and fuel vendors (+3.2%), furniture, electronics and appliance retailers (+3.0%), and dealers of building materials and garden supplies (+1.6%).

Core retail sales—which exclude gas stations and motor vehicle and parts dealers—dipped 0.2% in January, following a 2.7% increase in December.

GST holiday continues to skew data; carbon tax cut may offer modest relief

The GST/HST break that took effect on December 15 helped drive December’s spending surge, with analysts expecting the impact to linger in early 2024 data.

Meanwhile, the removal of the consumer carbon tax, set in motion by Mark Carney, could help support spending, senior BMO economist Shelly Kaushik noted, though the change won’t take effect until April.

“The tax holiday will continue to add some noise to the data through March—just in time for tariff uncertainty to hit consumer sentiment—though the removal of the consumer carbon tax could add a buffer starting in April,” she wrote.

StatCan’s early estimate for February retail sales points to a 0.4% decline, though the figure is subject to revision when the data is released on April 25.

Tariff concerns contribute to softer consumer spending

“Looking ahead, uncertainty looms,” wrote TD Economics’ Maria Solovieva. She noted TD’s internal credit and debit card data show weaker consumer spending in Q1, in line with January’s decline.

Post-holiday belt-tightening is typical for Canadian consumers, but the added layer of tariff uncertainty is not. While Solovieva noted tariffs could prompt some short-term stockpiling, any resulting boost to the economy would be “short-lived.”

“Consumers remain cautious and may restrain spending further until there is more clarity on the outlook for jobs, incomes and prices,” she said. “We’ve pencilled in a 2.7% (annualized) growth in consumer spending for Q1, and potentially a contraction in the following quarters.”

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Last modified: March 21, 2025

Brett Surbey

Brett Surbey is a corporate paralegal and freelance writer based out of northern Alberta. His verticals focus on personal and business topics such as finance, corporate law, personal finance, and business development. His work has appeared in Forbes Advisor Canada, Publishers Weekly, Industry West Magazine, and various academic journals. He lives with his wife and their two children.