• Canadian wholesale sales fell 3.4% M/M in December, which was much worse than expected and was the most since August 2003.
  • In real terms, wholesale sales fell 3.6% M/M, which is the fifth consecutive monthly slide.
  • The collapse in demand both domestically and internationally underpinned the deterioration. Most categories posted weaker sales. s

The pace of wholesale sales activity absolutely cratered in December, with a 3.4% M/M decline following the 1.5% M/M slide in November. The December drop was the largest since the blackout of August 2003. In real terms, it was apparent that prices played no role in the demise as real wholesale sales slipped 3.6% M/M in December. The unwind in activity is pretty well entrenched as the three month annualized trend in real shipments is now down 32.5%.

There was a broad cross section of categories and regions that slipped. Five of seven major categories posted declines in December and all ten provinces posted declines. The largest declines were posted in farm products (-10.4% M/M), lumber and millwork (-7.9% M/M), machinery and equipment (-6.1% M/M) and motor vehicles (-5.0%). Only two categories posted increases and those were food and beverages (+1.2%) and household goods (+0.4%). While wholesale trade was much weaker than expected, the fact that most export oriented sectors saw much weaker demand is not much of a surprise given what we have seen out of recent export and manufacturing data.

Inventories were up a modest 0.1% M/M, which, in conjunction with the slowdown in sales, pushed the I/S ratio higher to 1.37 in December from 1.32 in November.

On balance, this report is abysmal, but not surprising. We are coming in on the last bit of fourth quarter Canadian data, and when Canadian GDP is released at the beginning of March, all of this weakness will surely be reflected in the number. Our call is for GDP to register something on the order of a 3% decline, though recent data could impose some downside to that. The near term outlook is very weak, and is still very much contingent on the recovery in the U.S. and to a lesser extent, the global economy.

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.