Canada Retail Sales Research Brief

Momentum fades, given economic backdrop. Canada’s retail sales contracted 0.2 per cent monthly in February, which, after accounting for inflation, translated into a 0.7 per cent decline in total volume. With the Bank of Canada holding its overnight rate at 4.5 per cent, the cumulative interest rate hikes of 425 basis points over the trailing 12 months are beginning to be absorbed by the broader economy. Households are tightening budgets as real disposable income erodes and debt servicing payments rise. However, despite ongoing headwinds, February retail sales beat the general consensus, and inflation-adjusted sales were up 1.4 per cent annually. While retail sales, and thus overall economic growth, may continue to trend down over the coming months, commercial real estate remains well positioned to weather short-term hurdles as robust fundamentals and sustained demand persists across the property spectrum.