Machinery and equipment sales regain their momentum
Ottawa, ON -- Wholesale sales reached a new high in July, buoyed by a surge in the sale of automotive products, rep...
Ottawa, ON — Wholesale sales reached a new high in July, buoyed by a surge in the sale of automotive products, reports Statistics Canada. Sales increased by 2.1% to $42.4 billion in July, more than reversing a 0.8% drop in June. The lion’s share of July’s advance came from the automotive sector, which posted its largest monthly increase in nearly a year. Excluding the automotive sector, sales rose by 0.6%.
Most of the remaining growth came from the “other products” (+3.1%) sector, which is mainly made up of wholesalers of recycled metals, chemicals and seeds, and the machinery and electronic equipment (+2.8%) sector. Only two of the seven wholesale sectors registered declines in July: building materials (-2.7%) and personal and household goods (-1.6%).
Wholesale sales have generally been rising since September 2003, with most trade groups showing strength during this period.
In constant dollars, wholesale sales increased by 1.1% in July.
After declining 2.2% in June, the automotive sector bounced back strongly in July as sales rose by 8.4% to $8.9 billion. While the vast majority of the increase was the result of higher sales of motor vehicles (+9.1%), wholesalers of motor vehicle parts and accessories also had a strong month (+4.8%).
The rise in motor vehicle sales was the largest since August 2005, when wholesale sales of automobiles, bolstered by a series of major incentive programs, rose 15.9%. While not on the same scale as last year, the re-introduction of various incentive programs in July likely contributed to the latest increase. According to the New Motor Vehicle Sales Survey, sales of new cars and trucks increased by 3.0% in July, led by strong sales gains in Alberta.
July’s large increase in wholesale motor vehicle sales also coincided with a surge in passenger car imports, which increased by 17.5% during the month. Imported vehicles account, on average, for around half of all motor vehicle sales made by wholesalers.
Sales of “other products” regained their momentum in July, climbing by 3.1% after declining by 3.0% in June. This was the fourth increase in five months for this sector.
Since hitting a peak in May 2005, sales in this trade group have been somewhat volatile. In recent months, weaker exports by wholesalers of chemical products as well as some products related to the agricultural industry have been offset by strong sales of recycled metals, as sellers have benefited from the sizeable increase in metal prices since September 2005.
MACHINERY AND EQUIPMENT SALES REGAIN THEIR MOMENTUM
After edging down by 0.1% in June, sales of machinery and equipment rose by 2.8% in July. All three trade groups in this sector contributed to the growth. The largest increase came from wholesalers of computer and electronic equipment (+4.4%), who posted their first increase in three months. Wholesalers of office and professional equipment also had a strong month (+3.5%). This group has posted generally rising sales since October 2003.
Machinery and equipment sales rose by 1.5% in July, following a 0.6% rise in June. Wholesalers in this trade group continue to benefit from strong business investment, as Canadian businesses take advantage of the rising Canadian dollar to acquire cheaper foreign goods. According to the latest Quarterly Survey of Financial Statistics for Enterprises, machinery and equipment wholesalers recorded the strongest profit growth of all wholesale industries during the second quarter of this year.
Sales in the building materials sector fell for the second consecutive month in July, falling by 2.7%. The decline was widespread, with all three components contributing to the drop.
The slowdown in the US housing market (July housing starts in the US hit their lowest level since November 2004) continued to buffet wholesalers of lumber and millwork in July, as the trade group posted a fourth consecutive monthly decline (-6.3%). Wholesalers play a key role in the lumber export market, which has fallen continuously since the start of the year. The weakness in the US housing market has been reflected in the recent announcements of further shutdowns and layoffs in the Canadian lumber and forestry industry.
Wholesalers of metal products saw sales decline by 2.7% in July, ending a string of four consecutive monthly increases. Despite the decline this July, sales have grown strongly since July 2005 in line with the strong rise in metal prices during this period.
Sales of building supplies (-1.6%) fell for the third time in four months in July. After rising almost continuously since June 2003, the trend in this group has levelled off since April of this year.
ONTARIO POSTS LARGEST SALES INCREASE IN OVER TWO YEARS
Ontario was the prime beneficiary of the surge in automotive sales, as the province recorded its strongest sales increase (+4.2%) since March 2004. Any major fluctuations in the wholesale automotive sector are keenly felt in this province, where the sector accounts for over one-quarter of wholesale sales. Wholesale sales in Ontario have generally been rising since the start of the year.
Wholesalers in Saskatchewan regained most of the ground they lost in June as sales rose by 4.8%. Higher sales of agricultural machinery and equipment were behind most of the increase in July. The other notable gain came in Nova Scotia (+5.2%), where sales were buoyed by higher receipts in the automotive and food sectors.
After seeing their sales rise by 1.3% in June, Quebec wholesalers lost ground in July as sales fell 0.9%. Lower sales of household and personal products and building materials were the main contributors to the decline.
INVENTORIES RISE FOR SECOND STRAIGHT MONTH
After rising by 0.8% in June, inventories increased by a further 1.6% in July to $52.1 billion. The rise was broad-based, with 12 of the 15 trade groups registering an increase. Despite the increase in inventories in July, the inventory-to-sales ratio fell from 1.24 to 1.23 as a result of strong sales growth during the month.
While the trend in total inventories has generally been rising since October 2003, a comparable rise in the sales trend has kept the inventory-to-sales ratio relatively stable for most of this period.