Canadian wholesale sales edge up despite auto sector fall

OTTAWA — Wholesale sales rose 0.5 percent to $42.6 billion in August, following a 2.2 percent jump in July.

The increase came despite a large drop (-7.4%) in automotive product sales, which returned to more normal levels after posting very strong growth in July. This sector accounts for approximately one-fifth of all wholesale sales, so any significant drop will normally be reflected in the overall wholesale number, says Stats Canada.

Outside of the automotive sector, sales advanced at a robust 2.6 percent clip in August, with all six of the remaining wholesale sectors registering gains. Wholesalers of “other products” (mainly agricultural products, chemicals and recycled metals), personal and household goods, and food, beverages and tobacco products were among the most notable gainers.

The sales trend for wholesale has generally been rising since September 2003, in line with the growth in the Canadian economy, reports Stats Can. As key intermediaries in the economy, wholesalers have been able to benefit from both the surge in business investment as well as strong consumer demand during this period.

Automotive makes or break wholesale sales in much of Canada

The decline in the automotive sector was the result of a large drop in the sale of motor vehicles. However, this drop in sales came after a large increase in July and was therefore not entirely unexpected.

Nevertheless, wholesalers of motor vehicles could be facing a difficult period over the coming months, as weakening U.S. housing sales erode consumer confidence south of the border, reports Stats Can.

“Other Products” Sector Look Good:

Meanwhile, a substantial increase in the sale of agricultural inputs propelled the “other products” sector to its strongest monthly increase since April 2005 — mostly related to the fertilizer industry, where the implementation of a new pricing agreement encouraged buyers to return to the market after several months on the sidelines.

The personal and household goods sector also regained some momentum in August, as sales in this sector rose 3.5 percent after falling 2.7 percent in July. Sales of household goods have generally been rising since September 2003, as an increasingly favorable job market and strong housing sales in Canada continue to spur demand for consumer related items, says the agency.

Saskatchewan and BC Lead:

August was another good month for wholesalers in Saskatchewan, as sales increased by 11.7 percent following a 6.2 percent gain in July. Higher sales of agricultural inputs were behind most of the August increase, while in B.C. wholesale sales increased by 5.9 percent that month due to “other products,” as well as machinery and equipment being on the rise.

Only two provinces recorded drops in August: Ontario (-1.7%), which was hit by the decline in motor vehicle sales, and Nova Scotia (-0.3%).