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Canadian wholesale revenues reached a new high in July, buoyed by a surge in the sale of automotive products. Sales increased by 2.1% to $42.4 billion (Canadian) in July, more than reversing a 0.8% drop in June. The lion's share of July's advance came from the automotive sector, which posted its largest monthly increase in nearly a year.
Excluding the automotive sector, sales rose by 0.6%.Most of the remaining growth came from the "other products" (+3.1%) sector, which is mainly made up of wholesalers of recycled metals, chemicals and seeds, and the machinery and electronic equipment (+2.8%) sector. Only two of the seven wholesale sectors registered declines in July: building materials (-2.7%) and personal and household goods (-1.6%).
Wholesale sales have generally been rising since September 2003, with most trade groups showing strength during this period.
In constant dollars, wholesale sales increased by 1.1% in July.
After declining 2.2% in June, the automotive sector bounced back strongly in July as sales rose by 8.4% to $8.9 billion. While the vast majority of the increase was the result of higher sales of motor vehicles (+9.1%), wholesalers of motor vehicle parts and accessories also had a strong month (+4.8%).
The rise in motor vehicle sales was the largest since August 2005, when wholesale sales of automobiles, bolstered by a series of major incentive programs, rose 15.9%. While not on the same scale as last year, the re-introduction of various incentive programs in July likely contributed to the latest increase. According to the New Motor Vehicle Sales Survey, sales of new cars and trucks increased by 3.0% in July, led by strong sales gains in Alberta.
July's large increase in wholesale motor vehicle sales also coincided with a surge in passenger car imports, which increased by 17.5% during the month. Imported vehicles account, on average, for around half of all motor vehicle sales made by wholesalers.
Rebound in Sales of "Other Products"
Sales of "other products" regained their momentum in July, climbing by 3.1% after declining by 3.0% in June. This was the fourth increase in five months for this sector.
Since hitting a peak in May 2005, sales in this trade group have been somewhat volatile. In recent months, weaker exports by wholesalers of chemical products as well as some products related to the agricultural industry have been offset by strong sales of recycled metals, as sellers have benefited from the sizeable increase in metal prices since September 2005.
Machinery and Equipment Sales Regain Momentum
After edging down by 0.1% in June, sales of machinery and equipment rose by 2.8% in July. All three trade groups in this sector contributed to the growth. The largest increase came from wholesalers of computer and electronic equipment (+4.4%), who posted their first increase in three months. Wholesalers of office and professional equipment also had a strong month (+3.5%). This group has posted generally rising sales since October 2003.
Machinery and equipment sales rose by 1.5% in July, following a 0.6% rise in June. Wholesalers in this trade group continue to benefit from strong business investment, as Canadian businesses take advantage of the rising Canadian dollar to acquire cheaper foreign goods. According to the latest Quarterly Survey of Financial Statistics for Enterprises, machinery and equipment wholesalers recorded the strongest profit growth of all wholesale industries during the second quarter of this year.
Building Materials Sector Down
Sales in the building materials sector fell for the second consecutive month in July, falling by 2.7%. The decline