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Canadian wholesalers ended the third quarter on a bit of a down note as the industry recorded its largest monthly drop so far this year. Despite the drop, sales growth in the third quarter accelerated thanks to the gains made in the previous two months.
After rising in the previous two months, sales fell by 1.6% in September to $41.8 billion. Five of the seven wholesale sectors, representing 85% of sales, declined in September, with wholesalers of automotive products (-3.4%) and machinery and electronic equipment (-3.3%) bearing the brunt of the decrease. The only positive notes came in the building materials (+1.0%) sector, where sales were bolstered by a rebound in lumber and millwork sales, and the farm products sector (+4.6%), which continued its string of recent gains.
The longer term trend for the wholesale industry remains positive. Since the third quarter of 2003, wholesalers have enjoyed a period of strong growth, making it one of the economy's fastest growing sectors during this period.
In constant dollars, sales dropped by 2.2% in September.Growth picks up in the third quarter
On the provincial front, wholesalers in Saskatchewan were the main beneficiaries of the rise in fertilizer exports, as the province recorded its strongest quarterly growth in wholesale sales (+10.9%) in five years. Wholesalers in Nova Scotia (+5.9%) and British Columbia (+3.7%) also recorded increases substantially above the national average during the quarter.Demand for machinery and electronic equipment falls
Within the sector, wholesalers of computers and electronic equipment registered their fourth decline in the past five months, as September sales fell 4.2% to $2.6 billion. After posting a strong start to the year, sales in this trade group have been somewhat sluggish of late. Computer sales were notably soft during the month, as the delay in the launch of a major update to a widely used operating system may have led some buyers to hold off on their purchases.
Most of the remaining drop in the sector came from the machinery and equipment trade group, which recorded a significant decline (-3.8%) after four months of lackluster growth. Much of this equipment is destined for the manufacturing sector and, according to the latest release of the Business Conditions Survey, manufacturers remain fairly pessimistic about their near term prospects, due in part to dissatisfaction with current order levels.Auto sales continue to retreat from July high