Canada, remain robust.
The only decline in the personal and household goods sector came in the apparel trade group, where sales fell 4.8% after rising 1.6% in July. While August is normally a very strong month for clothing and footwear wholesalers (this is the time when retailers are gearing up for the traditional “back to school” shopping period), some wholesalers have indicated that retailers may have been ordering their products earlier than usual this year as consumers spread their purchases over a longer period.
Rise in alcohol and tobacco sales helps to boost food sector
A large increase in alcohol and tobacco sales helped to lift overall sales in the food, beverages and tobacco sector by 2.5% in August.
Wholesalers of alcohol and tobacco products boosted their sales by 9.4% in August. Much of this increase was attributable to higher demand by liquor retailers in Alberta, where sales are being driven by a combination of healthy wage growth and an influx of workers from other parts of the country. With liquor sales in the province rising faster than anticipated, some liquor retailers have reported shipment delays as wholesalers struggle to keep up with demand.
Sales of food products rose 1.9% in August, after a 0.8% rise in July. After slowing in the second half of 2004, sales in this sector have generally been rising.
Saskatchewan & British Columbia
August was another good month for wholesalers in Saskatchewan, as sales increased by 11.7% following a 6.2% gain in July. Higher sales of agricultural inputs were behind most of the August increase, which was the largest since February 2005. Products related to the agricultural industry account for roughly half of all wholesale sales in Saskatchewan.
In British Columbia, wholesale sales increased by 5.9% in August. Higher sales of “other products,” as well as machinery and equipment were behind most of the rise. After posting strong gains throughout most of 2005, sales in this province have experienced a bit of a lull since the start of the year, owing in large part to the ongoing slump in the lumber industry.
Only two provinces recorded drops in August: Ontario (-1.7%), which was hit by the decline in motor vehicle sales, and Nova Scotia (-0.3%).
Wholesalers added to their inventories for the third consecutive month in August, as levels increased by 1.2% to $52.9 billion. The rise was widespread, with 13 out of 15 trade groups reporting higher inventories.
One of the largest increases came in the metals trade group (+4.2%), where inventory levels rose for the seventh consecutive month. Inventory levels in this trade group have risen around 30% since the start of the year and are indicative of a broader phenomenon taking place throughout North America. According to the Chicago-based Metal Service Center Institute, US metal service centre inventories hit their highest level in August since January 2005. Higher than anticipated import levels, as well as generalized weakness in the manufacturing sector, explain in part the high inventory levels in this industry.
With sales growth failing to keep pace with the rise in inventories, the overall wholesale inventory-to-sales ratio edged up from 1.23 in July to 1.24 in August. The ratio is a measure of the amount of time (in months) that it would take to exhaust inventories at the current rate of sales. The ratio has remained relatively stable since October 2003.
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Other economic indicators at MDM’s
Release taken from Statistics Canada, http://www.statcan.ca/
A pullback in the automotive sector was not enough to dampen wholesale sales in August, as wide ranging gains in other sectors led the wholesale industry to its third increase in four months.
Wholesale sales rose 0.5% to $42.6 billion in August, following a 2.2% rise in July. The increase came despite a large drop (-7.4%) in automotive product sales, which returned to more normal levels after posting very strong growth in July. This sector accounts for approximately one-fifth of all wholesale sales, so any significant drop will normally be reflected in the overall wholesale number.
Outside of the automotive sector, sales advanced at a robust 2.6% clip in August, with all six of the remaining wholesale sectors registering gains. Wholesalers of “other products” (mainly agricultural products, chemicals and recycled metals), personal and household goods, and food, beverages and tobacco products were among the most notable gainers.
The sales trend for wholesale has generally been rising since September 2003, in line with the growth in the Canadian economy. As key intermediaries in the economy, wholesalers have been able to benefit from both the surge in business investment as well as strong consumer demand during this period.
Sales in constant dollars, which exclude the effects of price fluctuations, increased by 2.0% in August.
Automotive sales fall after a strong July
The decline in the automotive sector was the result of a large drop in the sale of motor vehicles (-9.3%). This drop in sales came after a large increase in July (+10.9%) and was therefore not entirely unexpected. Many of the motor vehicle sales made to dealers in July ended up being sold to consumers in August. According to the latest New Motor Vehicle Sales Survey, motor vehicle sales in August were the second highest on record, as consumers took advantage of dealer incentives.
Nevertheless, wholesalers of motor vehicles could be facing a difficult period over the coming months, as weakening US housing sales erode consumer confidence south of the border. The US is a key market for Canadian auto wholesalers.
Higher sales of agricultural inputs boost “other products” sector
A substantial increase in the sale of agricultural inputs propelled the “other products” sector to its strongest monthly increase since April 2005. Sales advanced 5.5% to $5.1 billion in August after rising 2.2% in July.
The rise in agricultural input sales was mostly related to the fertilizer industry, where the implementation of a new pricing agreement encouraged buyers to return to the market after several months on the sidelines. Delays in reaching a new agreement have had a significant impact on sales in recent months, as well as forcing some Canadian fertilizer manufacturers to shut down their plants for longer periods than usual during the second quarter of the year. Much of the fertilizer produced in Canada is exported to China and Brazil, and with the new agreement in place, exports of fertilizer surged 39.7% in August.
Sales of personal and household goods back on track
The personal and household goods sector regained some momentum in August, as sales in this sector rose 3.5% after falling 2.7% in July. While higher sales of household goods (+7.1%) accounted for most of the increase, wholesalers of pharmaceuticals also had a good month (+2.5%).
Sales of household goods have generally been rising since September 2003, as an increasingly favorable job market and strong housing sales continue to spur demand for consumer related items. Despite a recent slowdown, housing starts for the first eight months of the year remain ahead of last year’s level and housing prices, particularly in Westerntarget=_blank>Databank.