Data from Statistics Canada showed a decrease in retail sales by 0.4% in February, following a decline of 0.6% in January, reflecting concerns about the escalating trade between the United States and Canada. This came after an increase of 2.6% in December due to the suspension of the federal sales tax on certain goods. The most significant decline was in automobile sales, food, and beverages. Additionally, the Bank of Canada’s rate cut for the seventh consecutive time did not succeed in boosting consumer confidence, as they expressed increasing concern about their job security and financial safety.

Key Factors Behind the Decline

1. Trade Uncertainty: Escalating fears about the repercussions of the trade war between the United States and Canada prompted consumers to cut back on spending.

2. Sales Tax Suspension: The rise in sales in December was linked to the decision to suspend the sales tax on certain goods, leading to a short-term effect.

3. Automotive Sector in the Lead: Automobile sales recorded the largest percentage decline, along with a drop in sales of food, beverages, and sporting goods.

4. Growth Variation: Excluding the automotive sector, retail sales only rose by 0.2% in January, compared to a strong increase of 2.9% in December.

5. Consumer Confidence: Surveys indicate increasing anxiety regarding job and financial stability, reflecting a cautious approach to spending.

Future Outlook

Benjamin Reitzes, an expert at the Bank of Montreal, said that the decline in consumer sentiment due to tariff concerns "does not bode well," expecting weak spending to continue until the trade situation between the United States and Canada becomes clearer. The central bank may continue its interest rate cut policy to stimulate spending, but trade tensions remain the main obstacle to consumption recovery.