Retail sales were up in January but the energy price shock is set to squeeze consumers

Retail sales inched up 1.1 per cent to $70.7 billion in January. Photo by Peter J. Thompson/National Post filesArticle contentRetail sales inched up 1.1 per cent to $70.7 billion in January, according to the latest retail trade report from Statistics Canada.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThese figures were softer than the agency’s advance estimate, “extending the see-saw pattern that’s been in place for a year,” said Shelly Kaushik, senior economist at Bank of Montreal (BMO) in a note.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Play VideoArticle contentHowever, the January update and advance estimates for February (also about a one per cent increase) indicate retail sales volumes for the first quarter of 2026 could post their strongest quarterly gain since the fourth quarter of 2024, said Andrew Grantham, senior economist at Canadian Imperial Bank of Commerce (CIBC), in a note.Article contentArticle contentSales were up in six of nine subsectors and led by a two per cent rebound at motor vehicle and parts dealers, following a 1.6 per cent decline in December. This was due to higher sales at new car dealers (up 2.5 per cent) and other motor vehicle dealers (up 5.6 per cent), while sales of used cars declined three per cent.Article contentPosthasteBreaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentCore retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, rose 0.9 per cent in January.Article contentThis uptick was largely attributed by the agency to a three per cent increase in general merchandise sales, which marked a four-month streak of gains. The biggest decline in core retail came from the food and beverage sector, which dipped 0.6 per cent, thanks mainly to lower sales at supermarkets and other grocery stores.Article content“Momentum in services spending appears intact, based on our internal credit and debit card data, likely supported by higher-income households with greater financial buffers,” said Toronto-Dominion (TD) Bank economist Maria Solovieva in a note, though she added the Statistics Canada report was “inherently backward-looking.”Article contentArticle contentSales at gas stations and fuel vendors were down 0.4 per cent in January.Article contentRead More Canadian consumers were 'holding on' in December despite economic uncertainty Lacklustre retail sales heading into the holidays Article contentBMO’s Kaushik said there are “mounting headwinds” for consumers given higher energy prices amid the Iran war, which she said would likely show up in retail sales data for the month of March.Article content“Looking forward, the recent jump in gasoline prices will flatter the headline nominal retail sales figures in the coming months, however the squeeze to disposable incomes is likely to restrict purchases of other products and subdue overall sales volumes,” said CIBC’s Grantham.Article contentMichael Davenport, senior Canada economist at Oxford Economics Ltd., said in a note that his firm expects households to temporarily reduce savings to maintain spending levels.Article content“The new federal grocery and essentials benefit is also set to hit households’ bank accounts in Q2, which will help offset the hit to real incomes,” Davenport added.Article contentDavid Rosenberg, founder of independent research firm Rosenberg Research and Associates Inc., said in a note that the headline retail sales figure likely won’t help the Bank of Canada (BoC) make decisions around interest rates, given the surge in gas prices in March that will likely depress consumer spending.Trending TC Energy could be open to return to B.C. LNG pipeline project as global gas crunch threatens Oil & Gas Dennis, 79, is worried about a market crash. Should he move his portfolio to 100% income?

Investor Trans Mountain readies expansion in 2027 as pipeline space fills up Oil & Gas Garry Marr: Why it could be the right time to walk away from your real estate Personal Finance Canadian housing bears now have nine reasons backing them up Mortgages Article content“More relevant is the well-contained trend in pre-conflict retail prices,” Rosenberg said. “Alongside the moderate (consumer price index) data, this should give the BoC some flexibility if they want to keep another rate cut as a possibility or simply delay rate hikes.”Article contentThe inflation rate had slowed in February, according to the latest consumer price data showing a 1.8 per cent year-over-year increase. This was lower than the 2.3 per cent uptick in January, though this, too, did not account for the recent spike in gas prices.Article content• Email: slouis@postmedia.comArticle contentShare this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. TC Energy could be open to return to B.C. LNG pipeline project as global gas crunch threatens Oil & Gas Dennis, 79, is worried about a market crash. Should he move his portfolio to 100% income?

Investor Trans Mountain readies expansion in 2027 as pipeline space fills up Oil & Gas Garry Marr: Why it could be the right time to walk away from your real estate Personal Finance Canadian housing bears now have nine reasons backing them up Mortgages