Analysts surveyed by Reuters had expected retail sales to rise 0.3% in July. Statscan, in a preliminary estimate, said it sees July retail sales falling 0.2%.
Much of that July decline likely comes down to lower gasoline prices, but also signals rising consumer fatigue and a cooling of demand following a series of Bank of Canada interest rate hikes, economists said.
"Canadians have been feeling the pinch from both high inflation and rising interest rates," Royce Mendes, head of macro strategy at Desjardins Group, said in a note.
"So it should come as little surprise that retailers are beginning to see the pace of sales slow."
The Bank of Canada raised rates by a surprise 100 basis points in July. It is expected to hike its policy rate again by at least 50 basis points in September.
Canadian retail sales increased in June in eight of 11 subsectors, representing 76.8% of retail trade. In volume terms, retail sales were up 0.2%.
The Canadian dollar was trading 0.3% lower at 1.2985 to the U.S. dollar, or 77.01 U.S. cents, as the greenback moved higher against a basket of major currencies.
The July flash estimate was calculated based on a weighted response rate of 36.5%. The average weighted response rate for the survey over the previous 12 months has been 91.3%.
(Reporting by Julie Gordon in Ottawa, additional reporting by Dale Smith in Ottawa and Fergal Smith in Toronto; Editing by Paul Simao)
By Julie Gordon