Statistics Canada says retail sales rose 0.6% in July to $52.9 billion, helped by higher sales at motor vehicle and parts dealers and gasoline stations.
Economists had expected an increase of 1.0% for the month, according to financial markets data firm Refinitiv.
Statistics Canada says sales were up in six of 11 subsectors in July with the motor vehicle and parts dealers subsector contributing the most to the increase with a 3.3% increase. Sales at gasoline stations rose 6.1%.
However, the agency said core retail sales, which exclude those two subsectors, fell 1.2%.
Sales at building material and garden equipment and supplies dealers fell 11.6%, while sales at food and beverage stores dropped 2.1%.
Retail sales in volume terms were up 0.4% in July.
CIBC senior economist Royce Mendes said it looks like retail sales “hit a wall” in July as outside of automobile and gasoline sales retail sales lost ground.
“It’s a pretty sharp pullback after some explosive growth in retail spending in June,” he said.
Mendes said the slowdown could potentially be explained by a shift in spending towards the service sector.
“It’s possible that households actually just tilted some of their spending away from goods and back towards services,” he said, noting that consumers may have spent more on eating at a restaurant or going for a haircut.
Going forward, Mendes said the “recuperation phase” of reopening after Covid shutdowns will likely be slower and rockier, as predicted by the Bank of Canada.
He said ongoing restrictions and household cautiousness will likely lead to slower growth in the coming months.