The 2020 Mid-Year Economic Update_long

Canadian Wholesale Revenues Fall 3.1% in April

Wholesalers posted sharply lower sales in April, as declines in a number of major sectors erased all of the strong gains made over the previous two months.
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Overall sales fell by 3.1% in April to an estimated $42.8&nbsp ; billion. April's drop was the largest since August&nbsp ; 2003&nbsp ; and followed increases of 2.3% and 0.9% in March and February respectively.
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Five of the seven wholesale sectors registered declines in April. Leading the way was the automotive products sector (-8.3%), followed by other products" (-5.9%) and machinery and electronic equipment (-2.3%). Sales of building materials and farm products also posted decreases in April.
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The only positive note came in the food, beverage and tobacco products sector (+0.8%), while sales ...

easing of demand for investment goods.
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According to the Canadian economic accounts, investment in machinery and equipment fell&nbsp ; 1.5% in constant dollars in the first quarter of&nbsp ; 2007, the first decline since&nbsp ; 2002. This decrease was also reflected in imports of machinery and equipment, which declined&nbsp ; 2.0% in the first quarter, the first quarterly drop since&nbsp ; 2003.
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Food Products Sector Rises
The food, beverages and tobacco products sector rose for the fourth consecutive month in April, up&nbsp ; 0.8% to&nbsp ; $7.9&nbsp ; billion. As was the case in previous months, higher sales of food products (+1.1%) fuelled the sales growth in this sector, while alcohol and tobacco sales fell (-1.8%).
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In&nbsp ; 2006, sales of food products rose&nbsp ; 4.6%, their strongest annual increase since&nbsp ; 2002.
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By Province
The drop in sales was widespread across the country, with nine of the provinces and territories registering declines in April.
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The most significant drop was posted in Alberta (-7.7%), where sales hit their lowest level in six months. Weaker sales of machinery and equipment -notably in the oil and gas sector -were a major contributor to April’s decline, which brought to an abrupt end a string of three monthly increases.
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After posting five consecutive monthly increases, wholesalers in Saskatchewan saw their sales drop&nbsp ; 1.9% in April. Weaker sales of “other products”, such as agricultural chemicals, accounted for most of the decline.
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Manitoba was the only Prairie province to record higher sales in April (+1.3%), as stronger sales in the food, as well as machinery and other electronic equipment sectors helped to offset a drop in “other product” sales.
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In Ontario, sales were pushed down (-2.6%) by the large decline in the automotive sector. This was essentially a reversal of the results in March, when the automotive sector was a major contributor to the increase.
The automotive sector was also a major contributor to the drop in sales in Quebec (-3.2%), which had seen robust growth over the past two months. The other significant decline was posted in the machinery and other electronic equipment sector.
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Inventory-to-Sales Ratio
The steep drop in sales, combined with a modest increase (+0.5%) in inventories, boosted the inventory-to-sales ratio to&nbsp ; 1.28&nbsp ; in April, up substantially from March’s level of&nbsp ; 1.23&nbsp ; and near the three-year high hit in November&nbsp ; 2006. The ratio is a key measure of the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.
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April’s increase in inventories was widespread, with&nbsp ; 12&nbsp ; out of&nbsp ; 15&nbsp ; trade groups recording higher inventories in April. The major exception was the motor vehicles trade group, which followed March’s&nbsp ; 10.2% decline in inventories with a further&nbsp ; 3.7% drop in April. As a result, motor vehicle inventories reached their lowest level since January&nbsp ; 2006Wholesalers posted sharply lower sales in April, as declines in a number of major sectors erased all of the strong gains made over the previous two months.
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Overall sales fell by 3.1% in April to an estimated $42.8&nbsp ; billion. April’s drop was the largest since August&nbsp ; 2003&nbsp ; and followed increases of 2.3% and 0.9% in March and February respectively.
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Five of the seven wholesale sectors registered declines in April. Leading the way was the automotive products sector (-8.3%), followed by other products” (-5.9%) and machinery and electronic equipment (-2.3%). Sales of building materials and farm products also posted decreases in April.
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The only positive note came in the food, beverage and tobacco products sector (+0.8%), while sales of personal and household goods edged up only&nbsp ; 0.2%.
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Prior to the decline in April, wholesale sales had resumed their upward momentum in recent months, culminating in a strong first quarter.
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Sales in constant dollars, which take price fluctuations into account, fell&nbsp ; 2.3% in April.
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Automotive Sector Falls
After posting gains in four of the five last months, the growth in the automotive sector came to an abrupt halt in April as sales fell&nbsp ; 8.3% to&nbsp ; $8.0&nbsp ; billion. The decline was almost entirely due to lower sales of motor vehicles (-10.0%), as sales of motor vehicle parts and accessories experienced only a small drop (-0.4%).
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Although the decline in motor vehicle sales was the largest monthly drop since August&nbsp ; 2006, it followed a very strong gain in March (+7.8%). Even with the large drop in April, wholesale sales of motor vehicles in the first four months of&nbsp ; 2007&nbsp ; were still about&nbsp ; 4% higher than in the same period in&nbsp ; 2006.
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The sales growth since the beginning of&nbsp ; 2007&nbsp ; was mostly attributable to the strength of the Canadian retail market, which is the destination for the majority of motor vehicles sold by wholesalers. After posting their second best year on record in&nbsp ; 2006, sales of new motor vehicles have continued to increase in&nbsp ; 2007.
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According to the latest results from the New Motor Vehicle Sales Survey, sales jumped by a further&nbsp ; 6.9% in April, possibly spurred by the introduction of a new government program offering incentives to purchasers of fuel-efficient vehicles.
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Ag Products
Wholesalers of “other products” -mainly agricultural products, chemicals as well as recycled materials and paper products -also posted a significant decline in April, as sales fell&nbsp ; 5.9% to&nbsp ; $5.1&nbsp ; billion.
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Weaker sales of agricultural chemicals (primarily fertilizers) were behind much of the drop in April. However, sales of these products had been rising rapidly following the conclusion of a new pricing agreement in August&nbsp ; 2006&nbsp ; and were still substantially above the same period in&nbsp ; 2006.
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Machinery and Electronic Equipment Sector
Machinery and other electronic equipment sales dropped&nbsp ; 2.3% to&nbsp ; $8.9&nbsp ; billion, completely offsetting the solid gains posted in March. The decline was almost entirely attributable to lower sales in the machinery and equipment trade group (-6.3%), which had registered a strong increase (+6.1%) in March.
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There were mixed results for the other two trade groups in this sector. Following a decline in March, sales of computer and other electronic equipment rebounded&nbsp ; 3.0% in April. This was the sixth increase in seven months for this trade group. Meanwhile, sales of office and professional equipment fell&nbsp ; 0.8%.
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While sales of machinery and equipment have been a major source of strength for the wholesale sector over the past three years, the rate of growth has slowed of late, reflecting the

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