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Canadian Wholesale Sales Decline Unexpectedly in July

H.S. Borji
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Canadian Wholesale Sales Decline Unexpectedly in July

Canadian wholesale sales declined unexpectedly in July, a sign the economy was off to a weak start in the third quarter following a stronger than forecast April-June period.

Wholesale sales decreased 0.3 percent in July to CAD $52.894 billion, following an upwardly revised gain of 0.9 percent in June that was originally reported as 0.6 percent, Statistics Canada reported today in Ottawa. Economists forecast a gain of 0.6 percent.

Compared to July 2013, wholesale sales were up 6.1 percent.

Excluding motor vehicles and parts, sales were down 1 percent.

Sales volume, a figure used by government economists to calculate gross domestic product, declined 0.6 percent in July.

July snapped three consecutive monthly advances in Canadian wholesale trade. Declines were reported in five sub-sectors, which together accounted for 81 percent of total retail sales. Losses in these sub-sectors offset gains in motor vehicle and parts sales, official data showed.

The miscellaneous subsector posted the largest drop in July, falling $256 million, or 3.7 percent, to $6.6 billion. That was the lowest level in four months.

Food, beverage and tobacco sales decreased 1.1 percent to $10.3 billion, following an increase of 1.5 percent the previous month. Sales in this category have increased in seven of the last ten months.

Sales of machinery, equipment and related supplies dropped 0.7 percent to $11 billion.

Meanwhile, the building material and supplies sub-sector registered its first decline this year, as sales in this category fell 0.3 percent to $7.6 billion. The decline was mostly attributed to lower demand for lumber, millwork, hardware and other building supplies. Sales in this category declined 2.2 percent.

Motor vehicle and parts sales advanced sharply in July, rising 3.1 percent to $9.4 billion. The gains were led by higher motor vehicle sales.

On a regional level, wholesale sales decreased in five Canadian provinces, led by the Prairie province of Saskatchewan. Ontario and Quebec, Canada’s largest provinces, saw wholesale sales flat-line in July.

Inventories rose for the seventh consecutive month in July, edging up 1 percent to $66.5 billion. All major sub-sectors reported higher inventories, official data showed. The largest increase in dollar terms came from the motor vehicle and parts sub-sector, which saw inventories rise 2.9 percent.

The inventory-to-sales ratio, a measure of how long it takes to clear inventories at the current sales pace, increased to 1.26 from 1.24.

Today’s figures suggest a possible slowdown in economic activity at the start of the third quarter. However, as a standalone data release, wholesale sales are unlikely to undermine optimism the Canadian economy was recovering at a stronger pace following a disappointing first quarter.

In real terms, Canada’s economy expanded 0.8 percent in the April-June period, following a 0.2 percent increase in the first three months of the year. That was the largest quarterly increase since the third quarter of 2011.

In annualized terms, GDP expanded 3.1 percent in the second quarter.

The second quarter rally was broad-based, StatsCan data showed, as virtually all sectors reported growth. Household final consumption expenditure increased 0.9 percent, led by higher outlays on goods and services.

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