The 2020 Mid-Year Economic Update_long

Canadian Distributor 2005 Sales Up 5.4%

markets:


Alberta: $55 billion sold in 2005, up 15.5 percent. Sharp increases in oil prices accounted for much of the increase in sales by machinery wholesalers, as oil companies have accelerated their investments.


Manitoba: Personal and household goods performed well as a result of positive economic conditions. The Agreement on Textile and Clothing, which imposed quotas on imports, expired on Jan. 1, 2005, allowing some wholesalers to acquire products at a lower cost. Even before the agreement ended, two-thirds of the clothing sold wholesale in Canada came from abroad.


Saskatchewan: Sales in farm products surged 27.1 percent with the re-opening of the U.S. border to Canadian cattle under 30 months of age. Sales in “other products” have been spurred on by higher prices for chemical farm products and recycled metals.


British Columbia: In 2005, the province sold $47 billion in merchandise, an 8.6 percent increase from 2004. Sales in lumber only grew 3.3 percent, a fraction of the 46.2 percent increase in 2004. The value of lumber exports fell in 2005 because of a drop in lumber prices that more than offset higher volumes.


Quebec: $91 billion in sales, a 5.7 percent increase. Food products, tobacco and alcohol, and the “other products” sectors drove growth.


Ontario: Saw growth of just 2.2 percent in sales. In total, wholesalers here sold $237 billion worth of goods, or one-half the national total. A poor performance in the automotive sector slowed growth. Excluding motor vehicles, sales rose by 4.3 percent. Sales of automotive parts and products wholesalers dropped 2.8 percent due to a decline in motor vehicle sales the third straight year of decline for this group. About one-third of Ontario wholesale revenues result from exports to the U.S.


Atlantic provinces: Sales declined overall in Atlantic provinces. Newfoundland and Labrador was the only province of four that recorded an increase in sales for 2005.


Stronger Canadian Dollar
A constant price increase in 2005 can be attributed to the strength of the Canadian dollar, which maintained an average annual exchange rate of US$0.825 compared to US$0.758 in 2004.


This translates into lower prices for imports; Canadian businesses substitute less expensive foreign products for goods made in Canada. Wholesalers benefited from this substitution the machinery and electronic equipment sector, a major player in the import sector, accounted for nearly one-third of wholesalers’ sales in 2005.


The growth rate in 2005 was actually slower than in 2004. The rate of growth increased in most sectors, but three building materials, motor vehicle, parts and accessories, and “other” products slowed, canceling out the acceleration of growth in the other sectors.


Resources:
“Between the Producer and Retailer: A Review of Wholesale Trade for 2005”


Canadian wholesaler-distributors reported $470 billion (US$423 billion) in sales last year, up 5.4 percent from 2004, according to a report released earlier this month by Statistics Canada. When adjusted for inflation, the gain was 7.8 percent, the largest jump in the past six years.


Sales were bolstered by gains in the four westernmost provinces. Sales among wholesalers in Manitoba, Saskatchewan, Alberta and British Columbia have risen at an average annual rate of 9.1 percent. This is nearly double the rate of average growth for Canada as a whole, and three times the gain in the other regions of Canada combined. In 2005, these four provinces accounted for 60 percent of the total increase in wholesale sales nationwide.


The machinery and electronic equipment sector contributed the most to Canada’s overall sales gains. The sector includes heavy industrial equipment, as well as computer and office and professional equipment. It represented more than 31 percent of the year-over-year growth.


Key factors affecting wholesale trade in Canada in 2005:



  • Lower prices on certain products resulting in part from the stronger Canadian dollar against the American dollar

  • Increased capital investment by business

  • The re-opening of the American border to the trade of live cattle under 30 months of age

  • The decline in residential housing starts in Canada

  • China’s growing role in the world economy

Machinery and Electronic Equipment
For the second year in a row, business made investments in machinery and electronic equipment and wholesale sales were more than $95.5 billion (US$86.1 billion) in this sector, up 8.6 percent from 2004. It represents the strongest gain in machinery and equipment since 1997.


Factors contributing to this growth included: record investment in plants and equipment; and higher prices for raw materials due to an increase in world demand. Also, a growing proportion of goods sold came from China, especially computers and computer accessories, as well as telecommunications equipment. Import prices on office machinery and equipment fell 17 percent the decline for other types of telecom equipment and supplies was 7.6 percent.


Building Materials
Wholesalers in the building materials sector recorded a sharp slowdown in growth, with sales of more than $66 billion last year, up 8.5 percent from 2004. The rate of growth was less than half the increase of 20 percent during 2004.


Sales in lumber were $13 billion, up 2.5 percent. In 2004, growth was 23.8 percent in this group. Lumber prices fell 5 percent. Overcapacity in North America combined with world competition also contributed. Results also reflect a change in the housing markets in the U.S. and Canada. The number of housing starts fell 3.4 percent in Canada in 2005.


Metal products sales (used in construction) had a steeper slowdown in growth than lumber, with $14 billion in sales, up 7.1 percent compared with a 33.3 percent gain in 2004. Prices started to level out in 2005 with China’s entry into steel production.


Other building materials sales totaled more than $39 billion, an 11.2 percent increase, slightly less than the 14.7 percent increase the year before. Renovation and construction markets have stayed strong in Canada, supporting this growth.


By Region
In 2005, wholesalers in Manitoba, Saskatchewan, Alberta and British Columbia accounted for 60 percent of the total increase in wholesale sales nationwide.


Demand for machinery and electronic equipment and for building materials was the main reason for the strong growth in the western provinces. The economic and demographic boom in the West especially Alberta also fuelled growth.


A snapshot of regional growth, with details on each province’s top

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