Canada: Wholesale Sales Fall in Line with Expectations

Daily Forex Fundamentals | Written by TD Bank Financial Group | Jan 21 09 15:39 GMT |

Canadian wholesale trade slips 1.6% M/M in November. The rise in inventories push the I/S ratio to its highest level since early 2001. The slowdown in sales was broad based, as was the expansion in inventories. Canadian wholesale trade fell 1.6% M/M in November, which was basically in line with expectations. This is not only the first back-to-back drop since 2006 but also the third decline in four months, and sets up a weak backdrop for Canada’s November GDP. In real terms, wholesale trade fell 3.0%. Wholesale sales excluding autos were down 1.5% M/M in November. The cross section of industries that posted losses was broad, as four of seven industries declining. Evidence of weakening global demand was seen everywhere. But particularly large declines were recorded in the “other products” category, which fell 6.0%, automotives which fell 2.2% M/M and machinery and equipment which fell 1.6% M/M. Not only was the cross sector of industries broadly depressed, but the pace of sales using a provincial cross section was also down, as nine provinces posted declines. Inventory levels also rose in November with a 1.0% M/M gain, following the 0.9% M/M gain in October. Inventories were higher in 10 of 15 sectors which suggests that wholesalers now have to contend with a growing inventory overhang at a time when sales are slowing. In November, the inventory to sales ratio was at its highest since February 2001 at 1.32. On balance this reports adds to the growing body of evidence that points to a weak November GDP number, which will subsequently translated into a weak fourth quarter GDP report. Moreover, this report corroborates the view that the Bank of Canada presented recently that the Canadian economy is in recession. 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.