The war-induced spike in gasoline prices strained Canadian wallets in March, pushing up Canadian retail sales. On a seasonally adjusted basis, retail sales increased by 0.9 per cent to $72.7 billion, driven by stronger sales at gasoline stations and fuel vendors. Sales at gasoline stations and fuel vendors rose 12.4 per cent to $7.2 billion—the highest level since August 2022. In contrast, core retail sales—which exclude gasoline stations, fuel vendors, and motor vehicle and parts dealers—slipped 0.1 per cent.

In volume terms, retail sales declined by 0.7 per cent, indicating that price increases accounted for much of the nominal growth and consumers may be re-allocating spend as a result. Only four of nine retail subsectors posted monthly gains. Advance estimates point to a further 0.6 per cent nominal increase in April, likely owing to more recent gas price increases, though this figure remains subject to revision.

In B.C., retail sales rose 0.5 per cent in March on a seasonally adjusted basis, largely offsetting the 0.6 per cent decline recorded in February. On an unadjusted basis, retail sales in March 2026 were 2.4 per cent higher than in March 2025, with year-to-date growth of 1.8 per cent. Consumer price inflation has been higher, pointing to real declines in spending.

Subsector data (unadjusted) show gains in seven of nine categories mirroring much of the national story. Gasoline stations and fuel vendors led growth, with sales rising 17.3 per cent, followed by general merchandise retailers, up 9.3 per cent. In contrast, sales declined at motor vehicle and parts dealers (down 3.8 per cent) and at building material and garden equipment and supplies dealers (down 7.5 per cent).

Regionally, the Metro Vancouver area recorded another decline in retail activity, with seasonally adjusted sales falling 0.8 per cent in March, following a 1.1 per cent decline in February.

Canadian small business confidence deteriorated sharply in May, reversing April’s modest improvement and pointing to a weaker near-term growth backdrop. Ongoing conflict in Iran and higher fuel costs have undoubtedly weighed on sentiment. Nationally, the Canadian Federation of Independent Business (CFIB) Business Barometer’s 12-month indicator fell to 46.3 points, down from 58.5 points in April, while the three-month outlook declined to 47.9 points from 55.4 points. Both measures are now below the 50-point threshold, indicating that firms expecting weaker performance outnumber those expecting stronger performance.

The decline was broad-based. CFIB reported that all provincial indices weakened over both the 12-month and three- to four-month horizons, while long-term confidence also declined across industries specifically in retail, hospitality, and health and education. This suggests the May pullback was not limited to trade- or energy-exposed sectors but extended into consumer-facing and service industries as weak demand and elevated costs weighed more broadly on expectations. Education has also borne the brunt of migration caps by the federal government, which has hit university towns and private institutions hardest. Cost pressures remained elevated, led by fuel costs at 72 per cent, tax and regulatory costs at 64 per cent, insurance costs at 60 per cent, and wage costs at 60 per cent. Full-time staffing intentions also turned out negative, with 14 per cent of firms planning to hire and 16 per cent planning to reduce staff.

Based on three-month moving average data, B.C. small business confidence weakened in May. The province’s 12-month outlook index fell below neutral to 47.4 points, down from 56.5 points in April, while the three-month outlook stood at 58.5 points. Hiring plans also deteriorated. In May, 14 per cent of B.C. firms planned to increase full-time staffing, while 17 per cent expected to reduce staffing, leaving net hiring intentions at negative three percentage points. This sentiment has generally played out in the labour market where employment declined sharply over the past four months, specifically in the private sector. The latest business confidence readings point to further stagnation.

Bryan Yu is chief economist at Central 1.