Highlights

The automotive sector boosted wholesale sales (+0.8%) to $36.9 billion in December. Excluding the motor vehicles, parts and accessories sector, sales advanced only 0.2%.

Total sales in December reached their highest level ever, slightly exceeding the last peak reached in January 2003. Since February, wholesale sales have registered nearly zero monthly growth, in sharp contrast with the average monthly growth of 0.7% recorded from October 2001 to January 2003.

Six of the 11 sectors experienced an increase in December. The automotive sector registered the largest advance, with sales rising 3.7%. From February to August, this trade group experienced seven consecutive declines, which largely wiped out its growth for the year. However, the sector has shown some growth in recent months. Dealers increased their inventories at year-end and reported an increase in unit sales in January, the first in six months.

Other sectors such as beverage, drug and tobacco products (+2.3%) and lumber and building materials (+2.3%) also reported strong gains in December. The increased sales in these sectors were partly offset by sharp decreases in food products (-2.1%) and computers and software (-1.5%).

In constant prices, sales grew 0.9% in December.

In the past four months, the inventory-to-sales ratio has remained at historic lows

In December, the inventory-to-sales ratio was 1.25. Since last September, this ratio has fluctuated between 1.25 and 1.26, comparable to the record lows registered in 2002. But unlike 2002, the decline in the ratio since September was due to tighter control of inventories; in 2002 the decrease was mainly attributable to a steady increase in sales. In December, inventories rose 0.2%.

Growth slowed in 2003

In 2003, the Canadian economy underwent a number of shocks, including the appreciation of the dollar, the power blackout in Ontario, the SARS outbreak, the one case of mad cow disease (BSE) in Alberta, forest fires in British Columbia and a drop in the demand for automobiles.

As a result, total wholesale sales rose only 3.6% in 2003, a little more than half the 6.2% growth rate registered in 2002.

Real growth of wholesale sales was stronger in 2003

The appreciation of the dollar was a factor that probably had the most impact on wholesalers. Because of their close ties to international markets, wholesalers feel the effects of sudden changes in the value of the Canadian currency. From December 2002 to December 2003, the Canadian dollar appreciated about 19% against the US dollar.

Commodity prices fell strongly in 2003 for wholesalers importing from the United States and Asian countries where the currency is heavily tied to the American dollar. This fall in prices allowed wholesalers to purchase more products, which translated into a rise in the volume of sales. This largely explains the stronger growth of activity in constant prices reported by some wholesalers. For 2003 as a whole, the growth in constant prices was 6.2%, a higher rate than in 2002 (+5.5%).

Sectors such as apparel and dry goods and household goods posted robust increases in constant prices, with rates twice as high as those expressed in current dollars.

The automotive sector was the main cause of the slowdown in 2003

The automotive sector performed poorly in 2003, posting a decrease of 3.0% compared with a 15.1% gain in 2002. The effect of this decline on total wholesale sales was substantial: excluding sales in the automotive sector, total sales grew 5.2% in 2003, exceeding the rate for 2002 (+4.2%).

The automotive sector was the only trade group to see its sales decline in 2003. The drop in 2003 is largely attributable to a decrease in the number of new motor vehicles sold in Canada (-6.2%).

Wholesalers of beverage, drug and tobacco products posted the best performance in 2003 

Beverage, drug and tobacco sales grew by 11.8% in 2003. This sector led all trade groups in growth for the third time in four years. As in previous years, much of the growth was attributable to drug wholesalers.

Higher prices for some drugs, the growth of domestic demand and increased drug exports all contributed to the rise reported in 2003.

Computer and software wholesalers registered their first gain in four years

For wholesalers of computers and electronic equipment, 2003 was a good year, with sales up 3.4% from 2002. This was the first annual increase in four years. Factors contributing to the growth of sales in 2003 were the launching of new products, price decreases that made product purchases more attractive, and some recovery in the demand for computers.

This sector had peaked in mid-1999 when anticipation of the Y2K bug caused businesses to boost investment. These large commitments cut off growth in subsequent years.

Prince Edward Island and Alberta reported strong gains

Robust sales in 2003 were reported by wholesalers in two provinces: Prince Edward Island (+10.9%) and Alberta (+7.8%). The increase in Prince Edward Island was largely attributable to food products and farm machinery. Alberta experienced sizable sales gains in beverage, drug and tobacco products and lumber and building materials.

Ontario wholesalers saw their sales grow 2.8% in 2003, a rate slightly below the national average. The strong concentration of the automotive sector in that province had a major impact on growth. More than 75% of the motor vehicles, parts and accessories wholesale sector is concentrated in Ontario.

Sales in Quebec rose 3.9%. The strong representation of beverage, drug and tobacco products in the province, a sector which posted a sharp increase in sales, had an effect on total sales. Generally, wholesale sales in Quebec have been growing steadily since mid-2001.