Wholesale trade

Friday, April 18, 2008

After starting the year on a positive note, wholesale sales reversed course in February as declines in a number of sectors erased all of January's gains. Sales by Canadian wholesalers fell 1.8% in February to $42.6 billion.

Most sectors reported lower sales during the month, with the largest decline (-4.0%) coming in the automotive sector. There were also notable drops in the "other products" (-3.4%) sector, which includes wholesalers of agricultural chemicals, recycled materials, paper products and non-agricultural products, as well as the personal and household goods (-2.4%) and building materials (-2.2%) sectors.

The only two bright spots were the food, beverage and tobacco products sector (+0.7%), which was buoyed by a turnaround in alcohol and tobacco sales, and the farm products sector (+4.3%), which recovered from a weak start to the year.

Wholesale sales have been trending gradually downwards since July 2007, largely as a result of a significant decline in the automotive sector. Prior to this, sales had undergone a period of sustained growth that began in July 2003.

When measured in constant dollars, which removes price change effects to provide an indicator of volume, sales were 2.0% lower in February compared with a month earlier.

Automotive sector heads lower

Sales of automotive products fell 4.0% in February to $7.1 billion, their lowest level since July 2005. Motor vehicles dropped 4.8% and motor vehicle parts and accessories were down 1.1%.

This was the third consecutive monthly decline in motor vehicle sales following a substantial increase in November. Some of the recent decline can be explained by lower prices, as manufacturers took advantage of the strength of the Canadian dollar to offer attractive discounts on new vehicles sold in Canada. According to the Consumer Price Index, the average price to purchase or lease a vehicle fell 6.8% in February from a year earlier, which was the largest year-over-year monthly decline since 1956. The total value of motor vehicle sales has also been affected by a shift in consumer preferences to smaller more fuel efficient vehicles.

Note to readers Unadjusted and seasonally adjusted monthly estimates in current dollars have been revised starting in January 1993. Factors influencing revisions include late receipt of respondent information, correction of information on data provided, the replacement of estimated figures with actual values (once available), the re-classification of companies within, into and out of the wholesale trade industry and updates to seasonal and trading day factors. Estimates in constant prices have also been revised to incorporate the revision to the current dollar series for the period from 2002 to date. The volume and price series for the period prior to 2002 will be made available at a later date. The revised estimates are now available on CANSIM and by special request, and will also appear in the February 2008 issue of Wholesale Trade (63-008-XWE, free).

Sales of "other products" give back some of strong January gain

Wholesalers in the "other products" sector, gave back some of January's strong gain as sales fell 3.4% in February to $5.8 billion.

The decline was mostly the result of slower sales of agricultural chemicals, which were responsible for most of the surge in January. Nevertheless, with demand for these products continuing to grow, overall sales in the sector are still well ahead of those in the same period last year.

Personal and household goods sector down across the board

Sales in the personal and household goods sector ended a string of three consecutive monthly increases, falling 2.4% to $6.6 billion in February. All three components that make up this sector reported lower sales, led by the pharmaceutical products group (-2.5%). Receipts for household and personal products dropped 1.6%, while apparel was down 4.4%.

Ontario bears the brunt of February's decline

Ontario bore almost the entire brunt of the decline in February as sales in the province dropped 4.9% to $20.7 billion, their lowest level since October 2006.

Although most readily apparent in the automotive sector, the decline cut across a number of sectors in the province, including building materials, machinery and equipment and food, beverage and tobacco products.

Some unusual circumstances may have accentuated the decline in Ontario in February. The new Family Day holiday, which resulted in many businesses closing for the day, as well as a series of heavy winter storms that disrupted the flow of goods in the province, may have contributed to February's weak performance.

Saskatchewan was the only other province to post lower sales (-3.8%), but this followed a substantial increase in January. The drop was almost entirely attributable to a decline in the "other products" sector, which was behind the large increase in January.

On a more positive note, sales in Alberta rose (+2.3%) for the second month in a row following a brief setback in December. Improved performances in the automotive, "other product" and food, beverage and tobacco products sectors were behind much of the gain.

In Quebec, a healthy rise in sales of food products was the major factor behind a 1.9% increase in February.

Gains in the Atlantic provinces were concentrated in Newfoundland and Labrador (+9.1%), which also benefited from higher sales in the food products sector.

Inventory level little changed following two months of declines

Wholesalers continued to maintain a tight check on their inventories in February, as they remained essentially unchanged following two consecutive monthly declines.

Inventories edged up 0.1% in February to $54.3 billion, with 7 of 15 trade groups reporting higher levels.

In February, the most significant increases came in the motor vehicle, "other products" and pharmaceutical trade groups. These were almost entirely offset by drops in the metal products, lumber and millwork and apparel trade groups.

Inventory-to-sales ratio back up again

For the third month in a row, there was a significant change in the inventory-to-sales ratio. After dropping to 1.25 in January, the ratio headed back up to 1.28 in February, the same level as in December.

Although the ratio has been somewhat volatile of late, the overall trend has seen a slight decline since hitting its last peak in October 2006.

The inventory-to sales ratio is a measure of the time, in months, that would be required 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 February 2008 issue of Wholesale Trade (63-008-XWE, free) will soon be available.

Wholesale trade estimates for March will be released on May 20.

To obtain 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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