Canada: Wholesale Sales Weaker than Expected

Daily Forex Fundamentals | Written by TD Bank Financial Group | Oct 20 08 15:08 GMT |

Wholesale sales declines by 1.5% M/M in August, following the 2.7% M/M gain in July. In real terms, sales declined by a much more profound 3.3% M/M. Overall, the composition of the report was mixed, as the weakness was driven by the slump in auto- After five consecutive months of gains, Canadian wholesale sales declined by a worse than expected 1.5% M/M in August, following the upwardly revised 2.7% M/M (previously reported as +2.3% M/M) gain in July. The decline was worse than the -1.0% M/M expected by the markets and was the first drop in sales since February. In real terms, sales are down 3.3% M/M, which is the biggest drop in this indicator since August 2003. The details of the report were somewhat mixed, as the bigger than expected decline was driven in large part by the massive 11.7% M/M drop in the sale of automotive products. In fact, sales excluding automotive products rose by a modest 0.5% M/M. Outside of the drop in the auto sector, declines in the sale of building materials (down 2.7% M/M) and personal and household products (down 0.9% M/M) contributed to the disappointing drop. On the other hand, there were fair-sized gains in the sale of food products (up 2.2% M/M), machinery and equipment (up 1.4% M/M) and other products (up 2.2% M/M). And with inventories rising by 0.6% M/M, the inventory to sales ratio rose to 1.25 from 1.22 in July. Overall, the report was disappointing in the sense that it suggests that wholesale sales activity may become a drag on the Canadian economy in Q3. Moreover, with the favourable support from auto-related sales appearing to have come to an end, we expect Canadian wholesale activity to remain sluggish in the coming months as the weakness in domestic and U.S. demand take hold. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.