Increased spending on gasoline and fuel pushed Canadian retail trade activity up by 0.5 per cent in April, but economists are warning the gains may have more to do with higher prices than a strong consumer.

Sales at gasoline stations and fuel vendors rose by 5.1 per cent for the month, according to data released by Statistics Canada on Friday morning.

Sales at motor vehicle and parts dealers also posted gains, increasing 1.7 per cent in April following a 0.1 per cent decline in March, led by higher sales at new car dealers.

Overall, April marked the fourth consecutive monthly increase in retail sales and flash estimates suggest the trend continued into May, with a gain of one per cent.

However, core retail sales — which exclude gasoline stations and fuel vendors as well as motor vehicle and parts dealers — fell by 0.7 per cent, their second consecutive monthly decline, led by lower sales at food and beverage retailers and general merchandise retailers.

Randall Bartlett, deputy chief economist with Desjardins, said the headline numbers were misleading because retail sales were weak overall.

The sharp increase in gasoline and fuel sales were attributed to higher gasoline prices that month, which led households to reallocate money away from other items, he said.

“We’re potentially seeing a shift in consumer behavior because of the higher cost of gasoline. This may have some persistence as we go into May, as we saw in the advanced indicator. Some of that is going to be coloured by the rising cost of gasoline as well,” Bartlett said.

He also said the decline in core retail sales may persist into May due to this potential shift in consumer spending, but noted that more data is needed to confirm this trend.

“There’s a good chance that we’ll see ongoing weakness in things like core retail sales, potentially motor vehicle sales and almost everything outside gasoline sales, because of higher cost of fuel eroding household budgets,” Bartlett said.

“One month certainly isn’t a trend, but two months start to give a bit of an indication, so we’ll be watching to see if we get another month of weak core retail sales data. Then we can see if it’s households reallocating dollars towards higher costs of fuel, or if it’s a reflection of deep stagnation in the Canadian economy.”

Andrew Grantham, executive director and senior economist at CIBC Capital Markets, said Friday’s numbers further highlight that higher gasoline prices are cutting into the ability for households to spend money on other areas.

“Softness in household spending makes it harder for companies to pass through cost increases to consumers, and therefore less likely that the prior spike in oil prices will translate into more broad-based inflationary pressures. This is one of the reasons why we continue to expect that the Bank of Canada will keep interest rates on hold throughout 2026,” he wrote in an emailed note on Friday.

“Overall, the volume of consumer goods spending appears to be stalling in the second quarter following a strong start to the year, with high pump prices cutting into household spending on more discretionary items.”

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Bartlett said, however, that the data may look a little different for June. For one, low- and middle-income households started receiving the Canada Groceries and Essentials Benefit on June 5, which could mean a bump in retail sales for that month.

Gasoline prices have also started to come down after the United States and Iran reached a deal to reopen the Strait of Hormuz, which will help household budgets.

“There’s a real possibility that we could see better activity at the end of the quarter and leading into the summer.… We saw that real consumption growth was quite strong in the fourth quarter of last year and in the first quarter of this year, which sort of goes against the technical recession narrative that we’ve heard,” Bartlett said.

“This is where we can see core retail sales pick up again as fuel prices come down.”

Grantham made a similar observation.

“The recent decline in gasoline prices, combined with expanded household benefits paid by the Federal government, should support a pick-up in spending again during the second half of the year,” he wrote.

• Email: ptran@postmedia.com