By forex calendar in Core Retail Sales m/m —

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

Canadian Core Retail Sales Plunge Sharply in September 2025, Signaling Economic Concerns

Breaking News (September 19, 2025): Canada's Core Retail Sales m/m data for September 2025 has been released, revealing a significant contraction. The actual figure of -1.2% drastically undershot the forecast of -0.4% and fell far below the previous reading of 1.9%. This unexpected decline, categorized as having a medium impact on the CAD, raises concerns about the health of the Canadian economy and consumer spending.

The unexpectedly poor performance in Core Retail Sales warrants a closer look. This crucial economic indicator provides insights into the purchasing habits of Canadian consumers, excluding the volatile automobile sector. A significant drop, like the one witnessed in September 2025, can have far-reaching implications for the Canadian dollar and the overall economic outlook.

Understanding Core Retail Sales: A Deeper Dive

Core Retail Sales m/m (month-over-month) measures the percentage change in the total value of sales at the retail level in Canada, excluding automobiles. This exclusion is significant. Automobile sales, while representing a substantial portion (around 20%) of overall Retail Sales, are highly susceptible to fluctuations driven by factors such as incentive programs, seasonality, and consumer confidence shifts tied to larger economic trends. By stripping out these volatile components, Core Retail Sales offers a more accurate and stable reflection of underlying consumer spending trends. It's often referred to as "Retail Sales Ex Autos."

Statistics Canada is the authoritative source for this data, meticulously compiling and releasing it approximately 50 days after the end of the reporting month. This means the September data, released on September 19, 2025, reflects actual consumer behavior throughout the month of September.

Why is Core Retail Sales Important?

Consumer spending is a cornerstone of economic growth in most developed nations, including Canada. Robust retail sales indicate strong consumer confidence, a willingness to spend disposable income, and a generally healthy economic environment. Conversely, a decline in retail sales, especially in the core measure, suggests waning consumer confidence, potential economic slowdown, or increased savings rates as consumers become more cautious.

The usual effect of this indicator is that an actual reading greater than the forecast is considered positive, or "good," for the Canadian dollar (CAD). This is because it suggests a stronger economy and increased demand for the currency.

However, the September 2025 reading flies in the face of this expectation. The actual -1.2% significantly underperformed the -0.4% forecast, sending a negative signal to the market.

Analyzing the September 2025 Decline:

The significant underperformance in September 2025 raises several questions:

  • What factors contributed to the slowdown in consumer spending? Possible culprits could include:
    • Rising Inflation: If inflation remains stubbornly high, consumers may be cutting back on discretionary spending to prioritize essential goods and services.
    • Interest Rate Hikes: The Bank of Canada's monetary policy decisions could be impacting consumer spending. Higher interest rates make borrowing more expensive, potentially dampening demand for retail goods.
    • Economic Uncertainty: Concerns about a potential recession or job losses could be leading consumers to save more and spend less.
    • Supply Chain Issues: Ongoing supply chain disruptions could be limiting the availability of certain goods, impacting sales figures.
  • Is this a temporary blip or the start of a downward trend? One month of data is not enough to draw definitive conclusions. It will be crucial to monitor future releases to determine if this decline is part of a broader pattern.
  • What will be the Bank of Canada's response? This weak retail sales data may influence the Bank of Canada's future interest rate decisions. A continued decline in consumer spending could pressure the central bank to pause or even reverse its rate hike cycle to stimulate the economy.

Impact on the Canadian Dollar (CAD):

The negative surprise in Core Retail Sales for September 2025 has likely contributed to downward pressure on the Canadian dollar. Traders and investors often react quickly to economic data releases, and a disappointing reading can lead to a sell-off of the currency. This impact could be exacerbated if the market perceives the decline as a sign of broader economic weakness.

Looking Ahead: The Next Release

The market will be closely watching the next release of Core Retail Sales data, scheduled for October 23, 2025. This release will provide further insights into whether the September decline was an anomaly or a sign of a more significant economic slowdown. If the October data also disappoints, it would likely reinforce concerns about the Canadian economy and put further pressure on the CAD.

Conclusion:

The significant drop in Canadian Core Retail Sales for September 2025 is a noteworthy economic event. It signals potential weakness in consumer spending and warrants careful monitoring in the coming months. The impact on the Canadian dollar and the Bank of Canada's future monetary policy decisions remains to be seen, but this data release undoubtedly adds a layer of complexity to the economic outlook. Investors, businesses, and policymakers alike will be closely scrutinizing future data releases to gauge the trajectory of the Canadian economy.