Tariffs will be a major shock to the Canadian economy

The news: Canada’s retail sales rose 2.5% month-over-month (MoM) in December, per Statistics Canada, boosted by a sales tax holiday that began partway through the month.

• That handily beat expectations for a 1.6% gain, per a Reuters poll, and is the biggest jump in monthly sales since May 2022.
• Q4 sales rose 2.4% YoY, marking the second straight quarter of growth.

Storm clouds are forming: Retailers’ hot streak is cooling, as consumers’ exuberance fades amid tariff threats and other economic challenges. StatCan’s preliminary estimate for January retail sales indicates a 0.4% MoM decline, which would be the first time sales have fallen in seven months.