Image of smiling young lady standing in supermarket shop near cashier's desk holding credit card. Looking aside.

Canadian retail sales dropped 0.6% to $55.8 billion in July as sales at supermarkets and grocery stores fell with more people returning to restaurants and patios.

However, Statistics Canada said Thursday that its initial estimate for August suggests retail sales gained 2.1% for that month, but cautioned the figure will be revised.

BMO economist Shelly Kaushik said that as the economy reopened shoppers diverted some of their spending from goods to services.

“While the drop in retail sales is consistent with a pullback in July GDP, the early indications for August point to a broader rebound in activity,” Kaushik wrote in a report.

Statistics Canada reported last month that the economy contracted at an annualized rate of 1.1% in the second quarter and said its preliminary estimate pointed to a pullback of 0.4% in July.

Figures for manufacturing and wholesale sales released last week also showed sales fell in July.

Statistics Canada said Thursday that retail sales in July fell in five of 11 subsectors.

Sales at food and beverage stores were down 3.4% as sales at supermarkets and other grocery stores fell 3.4% and beer, wine and liquor stores lost 2.7%. Sales at convenience stores fell 8.4%, and specialty food stores dropped 0.4%.

Sales at building material and garden equipment and supplies dealers were down 7.3% for the month, but remained elevated compared with pre-pandemic levels.

Motor vehicle and parts dealers reported sales gained 0.4% in July, led by a 0.8% increase at new car dealers.

Sales at gasoline stations rose 1.4%.

Statistics Canada said core retail sales — which exclude gasoline stations and motor vehicle and parts dealers — fell 1.3% for the month.

Retail sales in volume terms fell 1.1% in July.