Retail sales in Canada declined in February amid trade turmoil and adapting to tax incentives

Retail sales in Canada declined for the second consecutive month. In February, the drop amounted to 0.4% after a 0.6% decline in January. Bloomberg reports that consumers scaled back their spending, fearing the consequences of trade tensions between Canada and the United States.

Benjamin Reitzes of Bank of Montreal suggested that consumer activity was impacted earlier by tax incentives. Referring to the December data, when sales increased by 2.6% due to tax benefits, the expert considers the current figures to be a result of stabilization of demand and concerns over trade tensions.

Catherine Judge from CIBC explains the current dynamics by the normalization of consumer activity after the agitation in December. The most pronounced decline in sales was registered in large cities, which demonstrated considerable decrease in retail revenues.

After consistently reducing interest rates over the past seven meetings, the Bank of Canada is now seeing a growing concern among citizens about financial security. Thus, the January sales decline came in line with a drop in demand for automobiles, food, and sporting goods. Excluding the auto sector, the increase was only 0.2% compared to 2.9% in December.