Retail sales in Canada rose only a disappointing 0.3 per cent gain in April, Statistics Canada reported Tuesday.

Economists had expected a gain of 0.5 per cent.

The weak report was a further indication that record-levels of consumer debt are dampening the domestic economy.

The $37.4 billion in sales came off a downwardly revised March, when sales were recalculated to show a 0.1 per cent slip.

Analysts said higher gas prices and weather were likely contributors to the soft sales in most regions.

"[But] Canadian consumer spending is clearly losing some momentum," said economist Douglas Porter of BMO Capital Markets.

"While the consumer has not folded up their tent, they're not in the mood to buy a new one either."

'Consumers are currently shouldering record levels of debt.'—Leslie Preston, TD economist

The pace in annual growth in retail sales has cooled to 3.6 per cent, from as high as 6.5 per cent late last year, he noted.

The big contributors to growth in April were autos, up 1.7 per cent, gas stations, 0.5 per cent, and furniture and home furnishing stores, up 3.2 per cent.

In Alberta, where the economy is strong due to high oil prices, posted a large 1.6 per cent increase in sales with widespread gains across store types.

TD economist Leslie Preston said it is unrealistic to expect household spending to continue to drive economic growth. Consumers sustained the economy as world demand for exports collapsed during the recession, but they are paying a price now, she said.

"Canadian consumers are currently shouldering record levels of debt relative to their income," she explained.

Statistics Canada reported Monday that household disposable income rose to 147.3 per cent in the first quarter, about the highest it's ever been in Canada since records began. The debt-service ratio also edged higher.

On top of that, higher gas prices are taking up a larger slice of Canadian disposable income, analysts said.

The good news in the picture is that debt servicing is unlikely to be impacted by higher interest rates any time soon.

Despite recent warnings by Bank of Canada governor Mark Carney that interest rates have only one way to go, the slowdown in household spending — along with other weak economic indicators — pose little danger to the tame inflation outlook.

A growing number of economists suggest Carney may not move on interest rates until next year, although the consensus of economists remains that an increase will come in the fall.

With files from The Canadian Press