Market analysts polled by Reuters had forecast sales would shrink by 0.5 percent from September. It was the first time Canada had posted three consecutive month-on-month declines since July 2012.
The report added to other data showing Canada's economy is struggling to shake off the effects of anemic crude prices, which are trading at levels not seen since the last recession.
Petroleum and coal sales fell for the fifth month in a row, dropping by 5.7 percent to their lowest level since April 2009 on greater-than-usual maintenance and other technical work at refineries.
Sales in the volatile aerospace sector dropped 10.3 percent while machinery sales fell 4.6 percent.
Unfilled orders fell 1.3 percent while new orders slipped 1.4 percent. The inventory-to-sales ratio climbed to 1.46, the highest since the 1.48 recorded in August 2009.