Highlights

Wholesalers posted a slight decline in February (-0.2%), selling $36.8 billion worth of goods and services. This decline ended eight consecutive months of growth. Sectors with strong ties to retail trade bore the brunt of the declines. Despite the drop in February, wholesale sales have posted relatively robust growth since November 2001, following a fairly lacklustre performance from the spring of 2000 to October 2001.

In February, 6 of the 11 trade groups fell. The sectors that contributed the most to the decline in terms of value were beverage, drug and tobacco products (-2.2%), apparel and dry goods (-7.7%), and metals, hardware, and plumbing and heating equipment and supplies (-2.1%). The decline in sales in these sectors was partly offset by increases in computers, packaged software and other electronic equipment (+2.9%), and in the "other products" category (+1.6%).

In constant dollars, wholesale sales remained unchanged in February.

Retail demand the source of weakness for wholesale trade in February

Aside from sales of food products, which remained essentially stable (+0.1%), all other non-durable goods sectors experienced a notable decline.

Beverage, drug and tobacco products fell 2.2% from January. However, January sales for this sector were inflated following the end of a strike at a major wholesaler; therefore, February sales returned to a more normal level.

Wholesale sales of apparel also fell (-7.7%). However, this sector has been relatively stable since October 2002, following a period of moderate growth that began in December 2001.

Sales linked to the housing market fall in February

Wholesale sales of household goods fell again in February (-3.8%), after a 1.2% drop in January. February also saw declines in metals and hardware (-2.1%) and in lumber and building materials (-1.4%), two wholesale sectors with strong links to the housing and renovation markets.

The declines observed in these sectors could be partly attributed to the downturn in the existing housing sales market observed by the Canadian Real Estate Association in three of the last four months.

Following the recent drops in household goods, this sector appears to have levelled off since September 2002, following relatively exceptional growth that began in October 2001.

However, despite February's drop, wholesale sales of hardware, and lumber and building materials grew strongly throughout 2002 because of the solid performance of the housing construction market.

Computers and electronics rise for a second consecutive month

Computers and electronics posted a 2.9% increase. This followed a month of very strong growth in January (+8.1%). In recent months, sales have begun to show signs of strength after a slight downward trend from April to September 2002. Nevertheless, sales remained well below levels observed in the fourth quarter of 2000. After the increase in 2000, wholesale sales of computers, packaged software and other electronic equipment weakened from January to September 2001.

The slight drop in wholesale sales is felt in only half of the provinces

In February, five provinces posted declines in wholesale sales. The biggest drops were in British Columbia (-2.5%), Quebec (-2.5%) and New Brunswick (-1.3%), the three main beneficiaries of the strong growth in January.

Declining sales in the other products category (paper and paper products, wood chips, industrial and household chemicals, and so on) as well as beverage, drug and tobacco products explained most of British Columbia's decline. The downturn in New Brunswick came mainly from lower wholesale sales in the automotive sector, as well as in beverage, drug and tobacco products. In Quebec, as in the other two provinces, the decline could also be attributed to lower sales of beverage, drug and tobacco products, as well as a strong drop in apparel and dry goods.

The strong increase in Prince Edward Island (+9.6%) was partly attributable to an increase in sales in the food products and the agricultural machinery sectors. This increase helped more than offset the 7.0% drop registered in January.

Inventory-to-sales ratio rises in February

The inventory-to-sales ratio rose to 1.24 in February. This was a slight rise from the 1.23 observed in January, a level that remains the lowest ever registered.

In February, inventories rose 0.3%, mainly because of the increases in the beverage, drug and tobacco sector and in the "other products" category.