Canada Wholesale Sales Drops 1.2% In September

Wholesalers account for the largest portion of the services sector, which in turn represents roughly two-thirds of total Canadian gross domestic product. Wholesalers generally act as an intermediary in the distribution of merchandise, and as a result tend to sell goods in large quantities to retailers, businesses and institutional clients.

The value of Canadian wholesale trade unexpectedly fell by 1.2 per cent in September from August, dropping for the first time in six months after a series of strong gains, Statistics Canada data indicated on Monday.

The disappointing result on wholesale trade marks the first month-over-month decline in sales since March, and suggests the Canadian economy lost speed as the third quarter came to a close. Canadian growth surged in July as the economy shook off the impact from Alberta wildfires that forced energy producers to curtail or shut down production in the spring. Economists have warned momentum has waned, and the fourth quarter will likely produce subpar growth.

Sales decreased in five of seven subsectors in September, accounting for 65% of total wholesale sales. The machinery, equipment and supplies subsector recorded the largest decline in dollar terms in September, down 4.0% to $10.9 billion, its lowest level since April 2016. In September, three out of four industries posted declines, led by the other machinery, equipment and supplies (-7.8%) and the computer and communications equipment and supplies (-4.6%) industries.Sales in the miscellaneous subsector declined 3.1% to $7.0 billion, following a 4.6% increase in August. While four of five industries reported declines, a 8.0% decrease in the agricultural supplies industry contributed the most to the downturn in September.

Following no change in August, the food, beverage and tobacco subsector reported a 1.1% decline in September to $10.8 billion, led by the food industry (-1.3%).

The motor vehicle and parts subsector rose 0.7% to $11.1 billion, following a 0.2% decrease in August. Declines in the new motor vehicle parts and accessories (-4.9%) and used motor vehicle parts and accessories (-8.3%) industries were outweighed by gains in the motor vehicle industry (+2.2%), which reached a record high $8.9 billion in September. Motor vehicle manufacturing sales also increased in September.

The personal and household goods subsector rose 0.8% to $8.2 billion, on the strength of gains in half of the industries in the subsector.

Wholesale inventories increased 0.2% for the month, the second successive increase, and the inventory/sales ratio rose from 1.29 from 1.27 the previous month. Inventories were, however, still lower by 0.3% compared with September 2015.