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"The details of the August retail sales report were softer than the headline increase, especially after accounting for the support from autos," Bank of Montreal economist Shelly Kaushik wrote in a report.

"Consumer spending continues to lag well behind population growth; with the latter looking to cool to around zero in the coming years, we’ll see if spending can recover from the combination of low inflation and falling interest rates."

Statistics Canada said retail sales were up in four of nine subsectors as sales at motor vehicle and parts dealers rose 3.5 per cent, boosted by a 4.3 per cent increase at new car dealers and a 2.1 per cent gain at used car dealers.

Gasoline stations and fuel vendors saw a 2.7 per cent decline for the month.

The retail sales report followed a decision by the Bank of Canada to cut its policy interest rate by half a percentage point to 3.75 per cent on Wednesday.

In cutting the benchmark rate, the central bank said household spending and business investment have picked up this year, but remain soft.

Sales at food and beverage retailers dropped 1.5 per cent in August, as supermarkets and other grocery retailers fell 1.9 per cent and convenience retailers and vending machine operators lost 0.6 per cent.

Furniture, home furnishings, electronics and appliances retailers fell 1.4 per cent as furniture retails slipped 3.2 per cent.

In volume terms, retail sales increased 0.7 per cent in August.

Looking ahead, Statistics Canada said its advance estimate of retail sales for September points to a gain of 0.4 per cent for the month, though it cautioned the figure would be revised.

TD Bank economist Maria Solovieva said that outside of vehicles, retail sales were the weakest in three months.

"Alongside the weakness in core sales, the downward trend in retail spending per capita remains intact, marking a major area of concern for the Bank of Canada, which moved to cut rates by 50 basis points this week," Solovieva wrote in a report.

This report by ´ºÉ«Ö±²¥was first published Oct. 25, 2024.