Canada retail sales slowed down to start the year, contracting by 0.6 percent in January, exceeding the -0.4 percent drop expected in the Econoday consensus forecast, and compared to a surge in December. Statscan said sales declined in three of the nine subsectors, led by decreases sales at motor vehicles and parts dealers.

Retail sales are up 4.2 percent from January 2024.

Core retail sales, excluding gasoline stations, fuel vendors and auto dealers, also declined falling by 0.2 percent following a 2.7 percent jump in December. Core sales are up 3 percent year-over-year.

The Bank of Canada's aggressive rate cuts are having an effect on household spending, and this report likely reflects impact of severe winter weather. It remains to be seen what impact the uncertain economic outlook for 2025 has on consumer spending.

On a monthly basis, sales at motor vehicle and parts dealers were down 2.6 percent in January, with lower sales at new car dealers (-3.2 percent), as well as parts, accessories and tire retailers (-2.8 percent).

Retail sales was at food and beverage retailers fell by 2.5 percent. Lower supermarket and grocery sales (-3.4 percent) led the decline, followed by beer, wine, and liquor retailers (-2 percent).

Sales at gasoline stations and fuel vendors jumped 3.2 percent in December, the third consecutive monthly increase.

E-commerce sales declined again in January down 0.9 percent, making up 6.1 percent of total retail trade.

Forecasters agree with the preliminary estimate from Statistics Canada calling for sales down 0.4 percent on month in January after a robust 2.5 percent jump in December.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The headline data are reported in cash terms and disaggregated into eleven main subsectors. Aggregate volume figures are also provided.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.