January Canadian retail sales are projected to decline by 0.4% month-on-month, following a 2.5% increase in December. This shift in consumer behaviour may relate to tariffs imposed in early February, which led to a noticeable change in sentiment among businesses.
The advance reading for February will be closely monitored as it is not predicted by economists but is likely to influence market movements significantly. As of now, the USD/CAD exchange rate stands at 1.4332 ahead of the retail report.
December Retail Sales Performance
December saw Canadian retail sales rise sharply by 2.5%, marking a strong end to the year. But that momentum appears to have faded in January, with early estimates pointing to a 0.4% decline from the previous month. Changes in consumer behaviour may not be entirely surprising, given the introduction of new tariffs in early February. Although those measures were not in place during the reporting period, businesses likely adjusted their outlooks ahead of time, dampening overall confidence.
February’s advance estimate becomes even more important in this context. Unlike the official figures for January, which come with a firm projection, this early reading has no economist estimate to set expectations. That makes it far more capable of shaking sentiment when released. Any unexpected strength or weakness will likely affect trading decisions, particularly with the way market pricing has been tied to retail performance in recent months.
Foreign exchange traders have already positioned cautiously, with USD/CAD sitting at 1.4332 ahead of the release. The exchange rate reflects both broader trends in the US dollar and local concerns over economic momentum. If the data falls in line with the anticipated decline, reaction could be limited unless February’s preliminary figures surprise. However, a sharper drop could reinforce worries about consumer activity and force a reassessment of outlooks. On the other hand, any sign of resilience in spending would be hard to ignore, particularly after such a strong December.
Market Reactions And Outlook
January’s retail figures are only one piece of a larger puzzle, but they arrive at a time when markets remain sensitive to shifts in demand. With tariffs likely playing a role in sentiment, attention will be on how businesses and consumers adjust in the coming months. February’s early reading may provide the first real clue.
