By Nojoud Al Mallees
(Bloomberg) — Canadian retail sales increased modestly in the third quarter as shoppers continued to flock to car dealerships amid U.S. tariffs on the auto sector.
Overall receipts for retailers fell by 0.7% in September, according to an advance estimate from Statistics Canada on Thursday. The drop followed a 1% rise in August, which matched the expectations of economists surveyed by Bloomberg.
The data point to a 0.3% increase between July and September, following a 0.4% gain in the second quarter, suggesting consumers are holding up even as President Donald Trump’s trade war hits Canada’s labour market.
Sales in August rose in six out of nine sub-sectors and were led by increases at motor vehicles and part dealers. Excluding autos, retail sales rose 0.7%.
Canadian consumers have rushed to buy cars this year as Trump threatened and then brought in steep tariffs on vehicles imported into the U.S.
Motor vehicle sales were up 8.2% over the first eight months of the year, compared to the same period last year, and were higher than overall retail sales. Auto receipts outpaced retail sales every month in 2025, except for February.
The Bank of Canada’s recent survey of consumers showed Canadians’ inflation expectations for vehicles rose significantly in the third quarter, remaining comparable to levels seen after the Covid-19 pandemic when supply chain problems drove up prices.
Traders in overnight swaps increasingly expect the Bank of Canada will lower its policy rate next week — placing the odds of a rate cut at around 80% — despite a hotter-than-expected inflation print this week.
Headline inflation rose to 2.4% in September, while most core measures heated up. But economists largely brushed off the data, maintaining that price growth is constrained enough to allow officials to deliver more relief to an ailing economy.
“The recent uptick in inflation coupled with the resilience in consumer spending means that a cut at next week’s meeting is far from a done deal,” Charles St-Arnaud, chief economist at Alberta Central, said in an email.
“However, with growth expected to remain anemic and the amount of slack in the economy remaining important, we believe the Bank of Canada will opt for a 25 basis point cut.”
Last month, the Bank of Canada delivered its first rate cut in six months in a bid to stimulate growth, but provided no clues about the future path of rates.
The central bank’s summary of deliberations released earlier this month revealed the central bank mulled holding its policy rate amid strong consumption.
Despite an overall contraction in the economy in the second quarter, household consumption rose by 4.5%, even as population growth stalls.
Speaking to reporters last week, Bank of Canada Governor Tiff Macklem said he expects strength in consumption to ease. The labour market is expected to remain weak, after last month’s employment gain of 60,400 jobs only partially reversed the more than 100,000 positions shed in the previous two months.
The central bank’s third quarter survey of consumer found Canadians’ spending intentions improved, driven by wealthier consumers such as homeowners and older people. For less wealthy individuals, including young people and those whose highest level of education is high school, spending intentions declined.
Regionally, Thursday’s figures show retail sales grew in five provinces in August. Higher sales at motor vehicle and part dealers helped Ontario post the largest provincial gain in dollar terms.
In volume terms, sales were also up by 1% that month.
–With assistance from Mario Baker Ramirez.
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Last modified: October 23, 2025