Canadian wholesale sales fell by 1.4% in August after a 2.6% gain in the prior month
- On an inflation-adjusted basis, the drop was a substantial 0.8% M/M. We are now tracking a 0.2%
decline for August GDP.
- The drop was broadly based, with all major sectors participating.
Canadian wholesalers experienced a dim August, with sales falling by a sharp 1.4%. This made for the ninth decline in eleven months, though it comes on the heels of the only two positive months. Ex-autos, the drop was 1.1%. On an inflation-adjusted basis, wholesale sales fell by 0.8%. The
sector sits perched upon a remarkable divide in the Canadian economy, as domestic- and consumer-oriented sectors fare better than those with a more industrial or export-oriented leaning. On annual basis, overall wholesale sales are down by a large 10.1%. Food sales, personal and household goods, and automotive products have done better than this aggregate, while building materials, machinery and electronic equipment, and other products have all done significantly worse.
The latest month's decline was broadly based, with all major sectors participating in the drop. In particular, the automotive products category suffered a sharp drop, though it comes immediately after an even sharper rise the prior month. Building materials remained soft on a monthly basis,
which suggests that the new homes side of Canada's housing market continues to be much softer than the existing homes side. Machinery and electronic equipment were down substantially,
too. From a provincial perspective, seven of ten provinces experienced declining wholesale sales in August. The inventory numbers suggest no great urgency to ramp up production. True, wholesale inventories fell for a sixth consecutive month, but the inventory-to-sales ratio remained unchanged at 1.35, and is substantially elevated compared to the norm of 1.25 pre-crunch. The overall story is one in which the Canadian wholesale sector has one toe in the healthy domestic side of the economy, and one toe in the soft foreign-facing side. As a consequence, the wholesale sector will continue to be a difficult one to call, and will probably remain mired somewhere in the middle. Our preliminary estimates suggest that Canadian GDP is now on track for something approximating a 0.2% M/M decline for August, though this is highly contingent upon forthcoming retail sales.