The 2020 Mid-Year Economic Update_long

Canadian Wholesale Revenues Up 4.7% in 2007

Canadian wholesalers reported a sharp decline in sales in December, erasing all of the gains made over the previous months. Despite the drop in December, preliminary figures indicate that wholesalers put in another solid performance in 2007.
 
Sales fell 2.9% in December to $42.7 billion, ending a string of three consecutive monthly increases. The decline was the largest since April and brought monthly sales to their lowest level since November 2006.


Overall, five out of seven wholesale sectors reported weaker sales in December. The automotive products sector accounted for around half of the overall decline, dropping 8.1% during the month.

Wholesalers outside of the automotive products sector fared little better, ...

Canadian wholesalers reported a sharp decline in sales in December, erasing all of the gains made over the previous months. Despite the drop in December, preliminary figures indicate that wholesalers put in another solid performance in 2007.
 
Sales fell 2.9% in December to $42.7 billion, ending a string of three consecutive monthly increases. The decline was the largest since April and brought monthly sales to their lowest level since November 2006.

Overall, five out of seven wholesale sectors reported weaker sales in December. The automotive products sector accounted for around half of the overall decline, dropping 8.1% during the month.

Wholesalers outside of the automotive products sector fared little better, falling 1.7% in December. The food, beverage and tobacco products (-3.1%), personal and household goods (-1.9%) and building materials (-1.8%) sectors were among the major contributors to the decrease.
The only positive note came in the farm products sector (+1.6%).

Sales in constant prices, which remove the impact of price changes to measure changes in the volume of sales, declined by 3.0% in December.

Full Year 2007
Preliminary figures indicate that wholesalers put in another solid performance in 2007.

Wholesalers sold $520.7 billion worth of goods in 2007, a 4.7% increase over the previous year.

All seven wholesale sectors registered stronger growth in 2007, led by the other products” sector, which consists primarily of wholesalers of agricultural fertilizers and supplies, chemicals, recycled materials and paper products, as well as by the personal and household goods sector.

The automotive sector was the only area to record growth significantly below the national average during 2007.

The increase in wholesale sales was spread across the country, with every province and territory posting gains in 2007. Leading the way among the provinces was Saskatchewan, which rebounded from a flat 2006. Other provinces with growth significantly above the national average included Newfoundland and Labrador, Prince Edward Island and Manitoba.

Central Canada presented a mixed picture in 2007. In Quebec, sales picked up from the previous year while Ontario was held back by the weakness in the automotive sector.

Also worthy of note was the very large increase in Canada’s north. Combined sales in the Yukon, the Northwest Territories and Nunavut increased 25%, much of this the result of significant investment in the mining sector.

Automotive Sales Tumble

Following a 3.9% increase in November, the automotive products sector reversed course in December as sales tumbled 8.1% to $7.4 billion, their lowest level since October 2006. Both trade groups that make up this sector reported significant declines, with motor vehicles down 8.5% to $5.9 billion, and motor vehicle parts and accessories dropping 6.2% to $1.5 billion.

A number of factors likely contributed to the downturn in motor vehicle sales in December. According to the New Motor Vehicle Sales Survey, retail sales were quite weak in November, reaching their lowest level on a unit basis since September 2005 and continuing the recent softening trend that has been evident in the Canadian vehicle market. As a result, dealers likely cut back on their wholesale purchases in December in an effort to reduce their inventory levels.

Another contributing factor was the unusually long shutdowns by Canadian assembly plants in December, the result of both model changeovers and retooling, which would have reduced the number of passenger cars flowing through the wholesale channel.

Food Products Pulls Back

Sales in the food, beverage and tobacco sector hit their lowest level since the start of 2007, falling 3.1% to $7.7 billion. The drop was entirely attributable to a decline in the food products trade group (-3.6%), as sales of alcohol and tobacco rose 2.3% during December.

After starting 2007 with four straight monthly gains, this sector has recorded mixed results over the past several months.

Lower Sales of Household Items
The personal and household goods sector declined for the first time in four months in December, down 1.9% to $6.5 billion. The drop was attributable to lower receipts in the household and personal products trade group (-5.8%), as the pharmaceutical (+1.1%) and apparel (+1.3%) trade groups both rose during December.

Although December’s decline in the household and personal trade group was the largest since the start of 2007, with labour market conditions remaining buoyant and with consumer spending continuing to expand, prospects for this trade group remain positive.

By Province

Nearly all provinces and territories registered weaker growth in December, with Western Canada bearing the brunt of the decline.

Hardest hit was British Columbia, where sales fell to their lowest level since November 2006, dropping 7.5% to $4.2 billion. Weaker demand for building materials, machinery and electronic equipment and automotive products were the main contributors to this decline.

The picture was not much better in the Prairie provinces, where Manitoba experienced a 7.0% decline. As was the case in November, lower sales of “other products” were behind much of the drop.

In Alberta, sales were kept in check (-4.2%) by slower sales in the food and automotive product sectors, while the drop in Saskatchewan (-3.7%) was mainly the result of declines in the “other products” and machinery and electronic equipment sectors.

As is normally the case, the large drop in the automotive products sector was most keenly felt in Ontario (-2.0%), ending a string of three consecutive monthly increases.
Inventories decline for the first time in six months

Wholesalers inventories fell for the first time in six months in December, down 0.3% to $55.4 billion.

Overall, 9 of the 15 wholesale trade groups reported lower inventory levels. The most notable declines came in the computer and other electronic equipment (-5.6%), lumber and millwork (-4.6%) and machinery and equipment (-0.9%) trade groups. These were partially offset by rises in pharmaceutical (+1.7%) and motor vehicle (+1.4%) inventories.

With overall sales falling at a much faster rate than inventories in December, the inventory-to-sales ratio rose to 1.30, its highest level in over four years.

The ratio is a key measure of the time in months that it would take to exhaust existing inventories if sales were to remain at their current level.

Source: Statistics Canada

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