06:43 AM EDT, 09/18/2025 (MT Newswires) -- Canadian auto sales slowed in August to 1.76 million units, or a 7.3% month-over-month drop, at a seasonally adjusted annualized rate (SAAR), according to Wards Automotive, said Scotiabank.

Auto sales continue to pull back from their tariff front-running spring surge, having declined in three of the past four months in seasonally adjusted (SA) terms, as headwinds build from tariffs, uncertainty, and slower job growth, noted the bank.

While auto sales had a strong start to the year, SA sales have slowed to the lowest level since June 2024, as August's non-seasonally adjusted sales were down by 3.9% year-over-year.

Recent economic data has shown tariffs are dragging on the Canadian economy earlier than Scotiabank previously anticipated, leading it to now expect the Bank of Canada to cut the policy rate to 2.25% by the end of 2025 as insurance against further weakening of the outlook.

Real gross domestic product contracted in Q2 (1.6% quarter-over-quarter SAAR) and the Canadian labor market shed more than 100,000 jobs combined across July and August. While annual headline inflation holds below 2% owing to the removal of the consumer carbon tax, measures of core inflation have continued to trend around 2.5% to 3% year-over-year. The bank expects inflation pressures to persist, leading the BoC to reverse the two 25 basis point cuts in the second half of 2026.

Scotiabank's outlook for Canadian light vehicle sales is 1.89 million this year and 1.84 million in 2026. The automotive sales rate is expected to remain soft through the end of 2025, compared with the spring, as softer labor markets pose headwinds to consumer spending growth.