Canadian retail sales rose by 0.9 per cent in March even though higher inflation , United States tariffs and geopolitical tensions are affecting the economy, but the gain was mainly due to rising gas prices.

Retail sales were also up 2.1 per cent in the first quarter of 2026, the seventh consecutive quarterly increase, Statistics Canada said on Friday.

Advanced estimates suggest retail sales increased by 0.6 per cent in April, which would mark the first time retail sales rose for four consecutive months since 2022.

“That doesn’t mean consumer spending has been super strong, but given the shocks and the uncertainty that have been impacting the Canadian economy over the last year, it’s been better than feared,” Nathan Janzen, assistant chief economist at Royal Bank of Canada, said.

“If you look back to last March and April — when trade tensions with the United States were really ramping up — consumer confidence measures were falling to one of the lowest levels in history. Relative to that backdrop, actual spending has been relatively resilient.”

Consumer spending edged up in March across most sectors, with the largest gains being at

This coincided with higher gas prices due to the oil price shock resulting from the war on Iran, Statistics Canada said.

Motor vehicle and car part sales decreased for the first time after two consecutive monthly increases, with lower sales at used car dealers leading the decline. Automotive parts, accessories and tire retailers were the only industry within this subsector to post an increase.

Core retail sales in March, which exclude gasoline and car deals, were down 0.1 per cent after two consecutive monthly gains. Lower sales in building materials, garden equipment, and supply dealers led to this decline. General merchandise retailers also had lower sales and fell for the first time in three months.

In volume terms, retail sales decreased by 0.7 per cent in March and increased by 1.2 per cent in the first quarter.

Economists say this shows higher gasoline prices are starting to put a squeeze on spending in other areas.

“The significant drop in real spending on gasoline is about as clear an example of demand destruction as you will find. Canadians reacted quickly to conserve in response to the sharp increase in gas prices,” David Watt, vice-president and director of economic research at Rosenberg Research & Associates Inc., said in a note.

“A key takeaway is that even though Canadians did spend more in the month, there were clear signs of consumers turning more cautious in response to the increase in uncertainty from the outbreak of war in the Middle East.”

Janzen also said gasoline is an essential purchase for many households, which contributed to increased spending at the pumps. Lower-income households are especially affected by higher gasoline prices because they have to spend more for the same volume of gas, so they are often taking out more debt to spend on non-gasoline purchases and saving less money on a month-to-month basis.

“The increased spending on gasoline wasn’t necessarily that people were driving more or buying more gas. It was just paying more for the same volume,” he said. “Households don’t really have a lot of options other than to pay that higher price.”

Overall, economists expect retail sales to weaken in the second quarter, especially if energy prices remain high.

Andrew Gratham, executive director and senior economist at CIBC Capital Markets, said retail sales fell for the first time in three months in March after adjusting for inflation.

“Unfortunately, advance data for April suggests more of the same (higher nominal sales but potentially lower volumes), setting (the second quarter) up to be a much weaker quarter for consumer spending,” he said in a note to clients.

Andrew Hencic, senior economist at Toronto-Dominion Bank, said the decline in retail sales volumes shows consumers are already cutting back as higher energy and gasoline prices eat into household budgets.

“Our outlook is that private domestic demand (and particularly consumer demand) will be subdued in the second quarter, largely due to significantly higher energy prices,” he said in a note.

“For the Bank of Canada, the current slack in the economy should allow them to look through the initial energy shock and wait for more clarity on how pervasive inflation pressures are becoming.”

  • Retail sales rise but energy price shock is set to squeeze consumers
  • Canadian consumers were ‘holding on’ in December

Economic growth remained slow in Canada as U.S. tariffs and the uncertainty surrounding the Canada-U.S.-Mexico Agreement continue to challenge some industries. But the Canadian economy likely dodged a recession, with preliminary figures suggesting real gross domestic product grew 0.4 per cent in the first quarter.

• Email: ptran@postmedia.com