Wholesale trade

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A surge in demand for automotive products gave a boost to wholesale sales in March, helping to propel the wholesale industry to its best quarterly gain in almost three years.

Wholesale sales increased by 1.9% in March to $44.1 billion, following a 1.0% rise the previous month. The back-to-back monthly increases helped push up sales in the first quarter by 3.4% over the previous quarter.

Around half of March's increase was attributable to strong sales of automotive products (+5.5%). There were also widespread gains among the remaining wholesale sectors, notably building materials, machinery and electronic equipment and farm products. Sales excluding the automotive sector rose 1.1% in March.

After showing signs of easing in the fall of 2006, wholesale sales have resumed their upward momentum in recent months, posting gains in four of the past five months. A major factor behind the recent gains has been the pickup in automotive sales, which had experienced a bit of a downturn during the latter part of 2006.

Sales in constant dollars, which remove the effects of price fluctuations to isolate the change in volumes, rose 1.8% in March.

Wholesale sales regain their momentum in the first quarter

Sales in the first quarter rose 3.4%. While this represented the best quarterly performance in almost three years, it was also partly a reflection of the weak (+0.2%) showing in the fourth quarter of 2006.

Although all seven wholesale sectors recorded higher sales in the first quarter, a major factor behind the first quarter's strong growth was the turnaround in automotive sales. The auto sector bounced back from a 3.8% decline in the fourth quarter of 2006 to record its highest quarterly increase (+7.6%) since the second quarter of 2004.

Wholesalers of building materials (+4.4%) and "other products" (+5.4%) were among the other significant gainers in the first quarter.

All provinces and territories recorded higher sales in the first quarter. The turnaround in the automotive sector pushed sales in Ontario up by 2.9% following a 0.1% drop in the fourth quarter of 2006. Sales in Alberta, which had softened significantly towards the end of 2006, posted a 5.3% gain. This was the 15th consecutive quarterly increase for the province.

Wholesalers in Saskatchewan, Nova Scotia and Prince Edward Island also posted increases substantially above the national average during the quarter.

Auto sector picks up speed

Wholesalers of automotive products continued to gain momentum in March, as sales rose a further 5.5% to $8.7 billion. This was the fourth increase in the past five months for this sector, which had previously undergone a mini-slide between August and October of last year.

Higher sales of motor vehicles (+6.6%) accounted for almost all of the increase in March, as sales of motor vehicle parts and accessories rose at a more modest pace (+0.8%). Sales of motor vehicles account for around 80% of all sales in the automotive sector.

The increase in motor vehicle sales coincides with the recent pickup in Canada's auto manufacturing industry. After hitting an eight-year low last October, motor vehicle shipments have risen significantly, culminating in another strong increase in March (+7.2%). As most of these vehicles are exported to the United States, there has also been a significant rise in passenger car exports during this period. In March, passenger cars exports rose 10.2%.

Building materials sector bounces back from February decline

The building materials sector bounced back in March as sales rose 2.1% to $6.2 billion, reversing all of February's decline.

Higher sales of metal products (+3.7%) and building supplies were behind most of the rise this month. Sales of lumber posted a more modest gain (+1.0%) following a substantial drop in February.

For wholesalers of metal products, this was the third increase in four months. The sales trend for this trade group has been on a continuous upswing since August 2005. The strength of oil and gas activity in Alberta, coupled with unprecedented levels of construction in Western Canada, continue to drive demand for metal products.

Sales of building materials rose for the third straight month. Following three years of solid growth, this trade group's sales continue to advance thanks to the strong performance of Canada's renovation and construction market.

Mixed fortunes for machinery and electronic equipment sector in March

There were mixed fortunes for the machinery and electronic equipment sector in March, as robust sales of machinery and equipment (+4.9%) were partially offset by lower sales of computers and other electronic equipment (-1.8%) and office and professional equipment (-0.8%).

March's increase in the machinery and equipment trade group was the largest monthly gain since April 2005, and was due in part to strong sales of construction equipment. Nevertheless, while the demand for construction equipment remains strong, a slowdown in demand for other types of equipment (notably oil and gas well machinery) has dampened the rate of sales growth in this trade group over recent months. A combination of higher drilling costs and lower natural gas prices explain some of the recent decline in demand for oil and gas well machinery.

Farm product sales boosted by higher sales of live animals

Wholesalers of farms products enjoyed their biggest monthly gain in nine months, as sales in March jumped 8.2% to $511 million.

This was the third consecutive monthly rise for this sector which, after hitting a recent low in May 2006, has registered generally rising sales. Higher sales of live animals, which make up around half of all sales in the farm products sector, have accounted for much of the recent rise.

Most of these animals are exported and in March exports of live animals increased by 9.4%, following a 12.8% increase the previous month.

Sales rise in most provinces and territories

Overall, 9 out of the 13 provinces and territories recorded higher sales in March.

In Ontario, sales were boosted by the strength of the automotive sector, rising 1.7% to $22 billion. However, sales outside of the key automotive sector were generally flat.

Wholesalers in Quebec continued to gain ground, as sales rose a further 2.9% to $8.3 billion following a 2.7% increase in February. March's increase came in spite of flat sales in the province's key food, beverage and tobacco products sector, which accounts for around a quarter of all sales in Quebec. Higher sales of automotive products, machinery and equipment and "other products" helped to drive up sales during the month. This was the fourth increase in five months for Quebec.

Sales in the Prairie provinces advanced for the fifth consecutive month, thanks to gains in Saskatchewan (+5.3) and Alberta (+2.1%). This also marked the fifth consecutive rise for sales in Saskatchewan, where the growth has been driven primarily by higher sales of "other products" such as agricultural chemicals and fertilizers.

In Alberta, higher sales of building supplies and machinery and equipment were behind most of the rise in sales in March.

Sales rose by 3.5% in Atlantic Canada in March, with Newfoundland and Nova Scotia accounting for most of the gains.

Inventory-to-sales ratio hits 10-month low

There was a significant decline (-10.5%) in motor vehicle inventories in March, but this was completely offset by increases in other trade groups, notably food products, machinery and equipment and "other products." As a result, inventories were unchanged in March at $54.2 billion, following a very small decline in February.

March's big boost in sales, coupled with unchanged inventories, triggered a significant drop in the inventory-to-sales ratio. From February's 1.25, the ratio fell to 1.23 in March, a 10-month low. This was the fourth consecutive decline for this ratio, which hit a three-year high in November.

The ratio is a key measure of the time, in months, that would be required in order to exhaust inventories if sales were to remain at their current level.

Available on CANSIM: tables 081-0007 to 081-0010.

Definitions, data sources and methods: survey number 2401.

The March 2007 issue of Wholesale Trade (63-008-XWE, free) will soon be available.

Wholesale trade estimates for April will be released on June 20.

For data or general information, contact Client Services (toll-free 1-877-421-3067; 613-951-3549; wholesaleinfo@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Marc Atkins (613-951-0291; marc.atkins@statcan.gc.ca), Distributive Trades Division.

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