By Robb M. Stewart
OTTAWA--An early look at April retail receipts suggests Canadians' spending has largely defied broader worries about the economy, though consumption is expected to continue weakening as the fallout from the trade war with the U.S. builds.
An advance look at retail trade for last month indicates sales increased 0.5% from March, Statistics Canada said Friday. March retail sales rose 0.8%, to a seasonally adjusted 69.83 billion Canadian dollars, the equivalent of about US$50.39 billion, the agency said.
Both increases would mark two straight months of modest gains, a recovery from the pullback in shopping to start the year when rougher-than-usual weather hit large parts of the country and a boost from a temporary federal tax break faded.
The data agency offered no details with the estimate for April, though economists suggest it may reflect some tariff front-running as consumers looked to buy goods before an expected increase in prices.
Tracking of card spending by Royal Bank of Canada, the country's largest lender, found consumer spending remained relatively resilient in the month, with purchases up broadly, including for discretionary goods and services such as food and dining and entertainment.
Receipts for March meant retail sales for the first three months of 2025 were up 1.2%, a fourth consecutive quarter of growth for the industry, though much cooler than the 2.4% advance in the final quarter of last year.
The continued strength is somewhat surprising given a slump in consumer confidence in recent months. The Conference Board of Canada's index of consumer confidence showed a modest improvement in April after hitting a record low the month before. Other polls suggest households are increasingly worried about job security and have scaled back spending plans.
"It is likely a sign that consumers are continuing to purchase goods in anticipation that prices will increase later due to the U.S. tariffs," said Charles St-Arnaud, chief economist at credit-union advocacy group Alberta Central.
He expects the spending in March and April to provide a strong handover to consumer spending in the second quarter and may mean economic activity is slightly more robust than expected, though--since much of the retail strength is likely spending being brought forward--it will likely prove temporary.
The Bank of Canada, which last month held its policy interest rate steady after seven cuts in a row since last June, has outlined a pair of scenarios that anticipate the economy could flatline or contract in the current quarter and economists have forecast unemployment will continue to edge higher through the year. Manufacturing trade in recent months has been weak and the labor market has shown signs of softening, with hiring little changed in April after nearly 33,000 jobs were lost the month before.
Stephen Brown, deputy chief North America economist at research firm Capital Economics, said the advance estimate for April retail sales implies a small rise in sales volumes given inflationary pressures built that month. That in turn supports his forecast that gross domestic product growth will slow sharply in the second quarter rather than shrink, which further clouds the outlook for the Bank of Canada's coming policy meeting in early June.
March's advance, a tick stronger than the 0.7% rise economists expected, was buoyed by a 4.8% jump in sales of vehicles and parts, the first increase in three months and the strongest advance since January 2023. That echoes auto sales trends in the U.S. as consumers rushed to buy before an expected rise in prices thanks to tariffs.
Stripping out the segment, retail sales dropped 0.7%, dampened by a sharp fall in gas station sales as prices at the pump retreated. Core retail sales, which exclude car and auto-parts dealers and gas stations, rose a modest 0.2% in March after a 0.6% gain the month before.
"The longer the trade war goes on, the more it will weigh on sentiment and spending," Shelly Kaushik, senior economist at Bank of Montreal, said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
05-23-25 1235ET
