CAD Core Retail Sales m/m, Dec 19, 2025

Canadian Consumers Tighten Wallets as Core Retail Sales Decline: A Deep Dive into December 2025 Data

Toronto, ON – December 19, 2025 – In a development that signals a cooling in consumer sentiment, Statistics Canada today released its latest figures for Core Retail Sales m/m, revealing a surprising contraction of -0.6% for the month. This latest data, released with a medium impact on the Canadian Dollar (CAD), falls significantly short of the 0.0% forecast and represents a stark reversal from the 0.2% growth recorded in the previous month. This downward trend warrants a closer examination for businesses, investors, and policymakers alike.

The Core Retail Sales m/m, also known as Retail Sales Ex Autos, is a crucial economic indicator that measures the change in the total value of sales at the retail level, specifically excluding the volatile automobile sector. This exclusion is deliberate. As noted by Statistics Canada, automobile sales constitute approximately 20% of total retail sales but are prone to significant fluctuations. By stripping out these auto figures, economists gain a clearer picture of the underlying strength and direction of consumer spending habits, providing a more reliable gauge of the economy's momentum.

The usual effect of this data is that an 'Actual' reading greater than the 'Forecast' is generally considered good for the currency. This is because it suggests robust consumer demand, which can lead to higher corporate profits and increased economic activity, thereby boosting investor confidence and the value of the national currency. However, the December 2025 report flips this expectation on its head. The actual figure of -0.6% is not only negative but also significantly lags behind the forecast of 0.0%. This divergence indicates that consumer spending, excluding major vehicle purchases, has actually weakened more than anticipated.

What Does This Contraction Mean for Canada?

A decline in core retail sales suggests that Canadian consumers are either spending less on a broad range of goods and services or are shifting their spending patterns in ways that are not captured by this specific metric. Several factors could be contributing to this downturn:

• Inflationary Pressures and Cost of Living: Despite potential easing in some sectors, the persistent cost of living, including housing, groceries, and energy, may be forcing households to prioritize essential spending and cut back on discretionary items. This could be manifesting as reduced sales in categories like clothing, electronics, or home furnishings.
• Interest Rate Environment: While the Bank of Canada's monetary policy decisions are not directly reflected in this monthly release, the cumulative impact of interest rate hikes in previous periods can lead to higher borrowing costs for consumers. This can dampen spending, particularly on larger purchases or items financed through credit.
• Consumer Confidence: A decline in core retail sales often correlates with a dip in consumer confidence. If households are feeling less optimistic about their future financial prospects, they are likely to adopt a more cautious spending approach, saving more and spending less.
• Global Economic Headwinds: Canada's economy is intrinsically linked to global economic performance. Any slowdowns or uncertainties in major trading partners could indirectly affect domestic demand as businesses and consumers become more risk-averse.

The Significance of the "Excluding Automobiles" Factor

It's crucial to reiterate the importance of the "excluding automobiles" aspect. While the automotive sector can be a significant contributor to retail sales, its volatility can mask underlying trends. A strong showing in auto sales might artificially inflate the headline retail sales figure, even if consumers are curtailing spending on other goods. Conversely, a weak auto sector could drag down the overall number. By focusing on core retail sales, analysts are able to get a more consistent view of the average consumer's purchasing power and willingness to spend on everyday items and discretionary goods. The current decline in core sales, therefore, suggests a more widespread slowdown in consumer activity that is not being propped up by the car market.

Looking Ahead: What's Next for Canadian Retail?

The release of the December 2025 data has significant implications for the immediate future. The next release, scheduled for January 23, 2026, will be closely watched for any signs of a rebound or further deterioration. Market participants will be scrutinizing this next report to see if the contraction in core retail sales was a temporary blip or the beginning of a sustained downturn.

Businesses will need to adapt their strategies by closely monitoring inventory levels, promotional activities, and marketing efforts. Policymakers, particularly at the Bank of Canada, will be analyzing this data as part of a broader economic assessment, which could influence future monetary policy decisions.

In conclusion, the Core Retail Sales m/m data for December 2025, released by Statistics Canada, paints a picture of a Canadian economy where consumers are exercising greater caution with their spending. The unexpected contraction of -0.6%, significantly below the forecast, underscores the need for a deeper understanding of the factors influencing household finances and their impact on the broader economic landscape. The coming months will be critical in determining whether this trend is a temporary adjustment or a more significant shift in consumer behavior.