MRO Magazine

Machinery and equipment wholesale sales and prices continue to rise

Ottawa, ON -- After ending 2005 on a high note, wholesale sales increased again in January 2006, Statistics Canada ...


Industry

March 22, 2006
By MRO Magazine
MRO Magazine

Ottawa, ON — After ending 2005 on a high note, wholesale sales increased again in January 2006, Statistics Canada says in its latest report on wholesale trade. The broad-based advance led overall sales to jump 1.8% to $41.3 billion. Sales increased in six of the seven sectors led by machinery and electronic equipment (+3.2%) and automotive products (+2.7%). The farm products sector fell 8.1%.

Since September 2003, total wholesale sales have generally been rising, with strength in most of the trade groups. Previously, slumping motor vehicle sales were the main cause of a decline that began in April 2003.

In constant prices, wholesale sales grew by 1.9% in January.

Wholesale sales up again in machinery and electronic equipment sector
Following the 0.9% increase in December, wholesale sales in the machinery and electronic equipment sector rose 3.2% in January to $8.4 billion. All groups in this sector contributed to the growth.

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Office and professional equipment sales rose 0.5%, the third gain in four months. Wholesalers in this group have generally seen rising sales since October 2003.

MACHINERY & EQUIPMENT

Wholesalers in the machinery and equipment group posted a 1.8% gain in January. This group has experienced a period of almost uninterrupted growth since January 2004. Higher raw material prices stimulated capital spending, especially in Western Canada, which boosted the growth of this group. According to the latest survey of private and public investment prospects, investment in equipment should remain robust in 2006, in light of the excellent prospects in the energy and utilities sectors.

Sales of computers and electronic products grew by 7.8% in January. After increasing at a dizzying pace in the 1990s, sales of this group lost some ground in 2000 and 2001, which it has not yet fully recovered. The weakness of the past two years is attributable, in part, to a strong push toward overseas manufacturers, particularly China, a fact that has pushed prices downward, while, at the same time, reducing the value of sales.

In fact, according to the Organization for Economic Co-operation and Development, China surpassed the United States as the foremost exporter of technological equipment such as mobile phones and laptops as early as 2004. These products accounted for 30% of China’s total exports.

AUTOMOTIVE PRODUCTS

The automotive products sector posted a 2.7% advance in January, as a result of higher wholesale sales of motor vehicles.

Wholesale sales of motor vehicles (+3.6%) increased for a second consecutive month in January to $6.8 billion, exceeding the peak attained in January 2003. Wholesalers in this group benefited in January from higher vehicle exports and increased demand from Canadian dealers. Approximately one-quarter of the sales of this group is destined for foreign markets.

For their part, wholesalers of motor vehicle parts posted a second consecutive decline in January (-1.4%). These wholesalers, who do not supply auto plants but sell mainly to retailers and dealers, have posted generally stable sales since July 2004.

FARM PRODUCTS SECTOR

Farm product wholesalers saw sales fall for the third consecutive month with an 8.1% decline in January. Just as in previous months, the drop was largely attributable to wholesalers of live animals. Wholesalers in this group had strongly benefited from the United States reopening the border in July 2005 to cattle under 30 months of age. Exports of live animals then grew rapidly, peaking in October 2005. In the following two months, cattle exports declined. In addition, this group’s sales were further hit by some temporary closures during the winter.

ONTARIO AND BRITISH COLUMBIA

In January, British Columbia wholesalers saw their sales rise 2.3%. Increases were reported in many groups, especially lumber. Lumber exports were strong, boosted by mild weather in January, which enabled home builders in the colder parts of the United States to continue working. British Columbia wholesalers have been enjoying strong growth since the last quarter of 2003.

In Ontario, wholesale sales grew 2.2% in January. This increase was attributable to a sharp rise in motor vehicle sales and to the computer and electronic equipment group, both of which are highly concentrated in Ontario. Generally, Ontario wholesalers have registered rising sales since January 2005.

In Saskatchewan, wholesale sales fell for the second consecutive month in January (-10.8%), mainly as a result of declines in the “other products” category (including seed, fertilizer and agricultural chemicals) and the farm products group.

INVENTORIES CONTINUE TO RISE

After increasing 0.7% in December, inventories grew a further 1.4% in January. The trend in total inventories has been generally upward since November 2003, after a five-month period in which wholesalers cut back their inventories.

The inventory-to-sales ratio remained stable at 1.21 in January. This ratio has generally been stable since October 2004, following a downward period that began in October 2003.