Canadian consumers are pulling back on spending as rising prices and high interest rates appear to be taking a toll on retail sales.

Retail sales slipped 0.2 per cent to $66.3 billion in February amid a drop in spending at general merchandise stores and gasoline stations and fuel vendors, Statistics Canada said Friday.

The early estimate for March also points to an even steeper decline of 1.4 per cent, though the agency cautioned the figure would be revised.

“We’re starting to see consumers tighten their belts,” retail analyst Bruce Winder said. “Canadian consumers are incredibly cautious right now.”

Economists have warned of a lag between rising prices and high interest rates and the affect on the economy. While the Bank of Canada held its key lending rate at 4.50 per cent at its most recent rate decision, it is up from 0.25 per cent at the start of 2022.

“It is clear that consumer spending behaviour has been impacted by the rapid rise in interest rates even as the economy as a whole has generally outperformed expectations,” Andrew Grantham, senior economist with CIBC Capital Markets, said in a client note.

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