Canadian Wholesale Revenues Fall in January

Following a strong end to  ; 2006, wholesalers began the year on a subdued note, as weaker deliveries of automotive products and personal and household goods pushed overall sales lower.
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Wholesale sales declined  ; 0.5% in January to  ; $42.7  ; billion, reversing some of the  ; 2.7% gain made in December. Significant drops in the automotive products (-4.6%) and personal and household goods (-4.5%) sectors were behind all of decline in January. Both of these sectors had posted substantial gains in December.
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The remaining five wholesale sectors, representing  ; 67% of overall sales, all registered increases in January, led by the building materials and machinery and electronic equipment sectors.
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Ontario bore the brunt of the decline in January, reversing most of the gains it had made in the previous two months. Most other provinces and territories recorded higher sales in January, with notable increases coming in both the Prairie and Atlantic provinces.
Sales in constant dollars, which remove the effects of price fluctuations to isolate the change in volumes, were unchanged in January.
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Automotive
After posting a substantial increase in December (helped in part by the introduction of new models) the automotive sector reversed course in January, dropping  ; 4.6% to  ; $8.0  ; billion. Lower sales of motor vehicles (-5.6%) were entirely to blame, as sales of motor vehicle parts and accessories remained essentially unchanged (-0.1%).
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The drop in motor vehicle sales reduced by more than half the strong gains made in December, and continues a recent pattern of large monthly swings. While such swings are not that unusual in this trade group, the North American industry is facing a particularly challenging period at present as automakers struggle to adapt their product lines to meet consumer demands for more fuel efficient vehicles.
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Personal and Household Goods
Sales of personal and household goods declined  ; 4.5% in January to  ; $6.1  ; billion, bringing to an end a string of three consecutive monthly increases. Two of the three trade groups in this sector posted lower sales, with only the apparel trade group showing a gain.
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The largest drop (-7.6%) came in the household and personal products trade group, where monthly receipts hit their lowest level since July  ; 2006. Nevertheless, sales in this trade group remained significantly higher than a year ago thanks to very strong retail sales, which last year posted their best performance since  ; 1997.
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Pharmaceutical wholesalers gave up most of the gains they made in December, as January sales fell  ; 3.7%. This was only the second decline in the past six months for this group, which continues to benefit from increasing consumer expenditures on pharmaceutical products.
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Following a very strong December, apparel wholesalers posted another solid increase (+3.9%) in January, as monthly sales hit their highest level in a year. This was the third increase in four months for this trade group, which had seen a significant decline in sales in early  ; 2006.
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Building Materials
Wholesalers of building materials made a strong start to the year, up  ; 3.3% to  ; $6.3  ; billion. All three trade groups advanced, with the strongest growth coming from the lumber and millwork and building supplies trade groups.
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January's rise in lumber sales (+9.9%) was the highest monthly increase in over three years for this trade group, and also marked the fifth increase in six months. However, the recent increases come after a series of significant declines which had seen lumber sales fall by some  ; 20% in the first half of  ; 2006.
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Much of this lumber is exported and exports have also picked up somewhat of late after

hitting a three and a half year low in November  ; 2006.
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Machinery & Electronic Equipment
Sales in the machinery and electronic equipment sector increased by  ; 1.3% in January to  ; $8.9  ; billion, more than reversing the small decline in December.
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The biggest increase in this sector came in the computer and other electronic equipment trade group (+2.7%), which rose for the third time in four months, with the machinery and equipment trade group (+0.9%) accounting for most of the remaining growth.
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Sales in this sector have done particularly well over the past three years, as Canadian businesses have taken advantage of the strong Canadian dollar to invest in new equipment (much of which is priced in US dollars). In December, machinery and equipment imports surpassed the  ; $10.0  ; billion mark & mdash; a level not seen since the record high in November  ; 2000  ; during the peak of the information and technology boom.
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According to the survey of private and public investment intentions for  ; 2007, overall investment in machinery and equipment is projected to grow by a further  ; 4.5% this year.
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By Province
Ontario (-3.2%) bore the brunt of the decline in January, reversing much of the gain made over the previous two months. The drop was largely attributable to lower sales of motor vehicles.
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The decline in Ontario masked an otherwise healthy month for the rest of the country, as wholesale sales in both the Prairie (+4.7%) and Atlantic (+5.1%) provinces recorded strong advances.
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Most of the gains in the Prairie region came in Alberta (+4.7%), which benefited from strong sales of food products and building materials. January's increase was the highest in the province since April  ; 2005  ; and follows a slight easing of growth in the last quarter of  ; 2006.
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January also proved to be a good month for wholesalers in Manitoba (+8.3%), as the province registered its largest monthly increase since April  ; 2004. Stronger sales of machinery and equipment and other products" (mainly agricultural products) were behind much of the January increase.
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In the Atlantic provinces, Nova Scotia, New Brunswick and Prince Edward Island all recorded healthy increases in sales. Newfoundland and Labrador, which has led the region in growth over the past two years, was the only province to register a decline.
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Inventories
Following a significant decline in December, inventories resumed their upward momentum in January, rising  ; 0.8% to  ; $54.1  ; billion.
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Overall,  ; 10  ; out of  ; 15  ; trade groups, representing some  ; 75% of inventories, reported higher inventories in January, with the most significant increases coming in the household and personal products, food and motor vehicle parts and accessories trade groups.
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After registering a fairly large drop in December, the inventory-to-sales ratio moved back up from  ; 1.25  ; to  ; 1.27  ; in January. There has been a significant rise in the ratio over the past six months, prior to which the ratio had remained fairly stable since February  ; 2005. The ratio measures the amount of time (in months) that it would take to exhaust inventories at the current rate of sales.
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Release taken from www.statcan.ca