Statistics Canada
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Wholesale Trade

September 2007


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Analysis — September 2007

Widespread gains contributed to an estimated 1.1% rise in sales in September to $43.7 billion, partially offsetting August's 1.9% decline.

September's increase, coupled with a healthy gain in July, pushed overall sales in the third quarter up 1.2%, more than reversing the second quarter's 0.6% decline.

Chart 1 Wholesale sales

Led by stronger sales of "other products", five of the seven wholesale sectors reported increases in September. Sales in the "other products" sector rose 4.2%, boosted by higher sales of agricultural chemicals. The personal and household goods sector also had a solid month (+2.0%), as did the food, beverages and tobacco sector (+1.4%). Other sectors posted smaller gains, while sales in the key automotive products sector, which have been quite volatile in recent months, were unchanged.

The building materials sector registered the only decline (-0.2%) in September following another large drop in lumber sales.

Sales in constant prices, which take price fluctuations into account, rose 1.5% in September to $48.4 billion.

Higher sales of agricultural chemicals give a boost to the "other products" sector

The "other products" sector, which consists primarily of wholesalers of agricultural fertilizers and supplies, chemicals, recycled materials and paper products, recorded its biggest gain of 2007 in September, as sales rose 4.2% to $5.5 billion.

Sales of agricultural chemicals such as fertilizers were particularly strong, reflecting strong global demand for these products. According to the latest international trade figures, exports of fertilizers and fertilizer materials surged 25.6% in the first nine months of 2007 to hit the $3 billion mark. While the United States remains by far the largest market for Canadian fertilizers with around two-thirds of the demand, surging demand from major developing countries, most notably China and India, has been a significant factor behind the rapid growth in these exports in 2007.

Widespread gains in the personal and household goods sector

Sales in the personal and household goods sector rose 2.0% in September to $6.6 billion. All three trade groups in this sector contributed to the increase.

Wholesalers of apparel led the way, with a 4.3% rise in sales to $800 million. After starting the year with five straight declines, sales in this trade group have picked up of late, posting increases in three of the previous four months.

The household and personal products and pharmaceuticals trade groups, both of which registered declines in August, also advanced in September. Sales of household and personal products rose 2.2% to $2.8 billion, while the pharmaceuticals trade group gained 1.2% to $3.0 billion.

Building materials sector held back for the second straight month by weak lumber sales

After dropping 2.4% in August, sales in the building materials sector edged down 0.2% in September to $6.1 billion.

As was the case in August, the lumber and millwork trade group was the major contributor to the decline in this sector. Following significant drops in each of July and August, sales in the lumber and millwork trade group fell a further 7.8% in September to $932 million, their lowest monthly level since January 2004.

Despite recent declines, overall sales in the lumber and millwork trade group in the first nine months of 2007 were unchanged from the same period in 2006. Although sales in this trade group have been significantly affected by the well-publicized difficulties in the US housing market, the majority of the products sold by wholesalers in this trade group were destined for the Canadian housing market, where demand remains fairly strong.

Saskatchewan boosted by healthy demand for agricultural products

A marked turnaround in sales in Saskatchewan, coupled with healthy gains in Alberta, Quebec and Ontario, were the major highlights in September.

Following five straight monthly declines, sales in Saskatchewan surged 10.1% in September to $1.3 billion, their highest level since April. A turnaround in the "other products" sector (mainly agricultural chemicals and fertilizers), which had been responsible for most of the recent declines, was behind most of September's gain.

September also proved to be another good month for Alberta's wholesalers, as their sales increased (+1.8%) for the fourth consecutive month to a new high of $5.7 billion. Higher sales in the food, beverage and tobacco products, and the "other products" sectors were behind most of September's rise.

In Quebec, sales advanced (+2.1%) for the third consecutive month to $8.5 billion. Stronger demand for personal and household goods, building materials and food products was the main factor behind this change.

After hitting their lowest level of the year in August, sales in Ontario recovered in September, up 1.2% to $21.4 billion. The building materials and "other products" sectors were among the major contributors to the increase.

The most notable drop came in British Columbia, where sales fell (-3.1%) for the second consecutive month to $4.3 billion. As was the case in August, weak lumber sales were mostly to blame. Despite these recent declines, the sales trend for the province remains positive following significant gains earlier in 2007.

Third quarter sales rebound from second quarter decline

Four of the seven wholesale sectors reported higher sales during the third quarter. The personal and household goods sector led the way (+3.4%), thanks to healthy sales of pharmaceuticals and apparel. With the exception of the first quarter of 2006, when sales were flat, quarterly growth in this sector has been growing without interruption since the second quarter of 2003.

Chart 2 Inventory-to-sales ratio

Wholesalers in the machinery and electronic equipment sector also had a good third quarter, posting their eighth consecutive quarterly gain (+2.5%). Within this sector, higher sales in the machinery and equipment trade group were responsible for the increase, as sales in both the computer and other electronic equipment, and the office and professional equipment trade groups edged down.

The automotive products sector, which was the major contributor to the overall second quarter drop, fell again in the third quarter (-0.9%). Weak sales of motor vehicles were behind the decline. The drops in the latest quarters represent a marked change from the robust growth (+7.1%) registered in the first quarter of 2007.

On the provincial and territorial front, eight provinces and territories recorded higher sales during the third quarter.

Wholesalers in Alberta shook off a second quarter decline (-4.0%) to register their fastest quarterly growth (+6.5%) in 10 years, thanks to gains in a number of sectors.

Quebec (+1.6%) and British Columbia (+1.7%) also rang up healthy gains in the third quarter. Quebec was aided by the strength of the personal and household goods, and machinery and electronic equipment sectors, while in British Columbia, higher sales in the personal and household goods, food, beverages and tobacco products, and automotive products sectors more than offset weakness in the building materials sector.

For the second consecutive quarter, sales in Ontario were held in check (-0.1%) by another weak performance in the automotive products sector, which accounts for around a quarter of all sales in the province.

Inventories changed little following significant increase in August

After registering the second highest increase of the year in August (+1.0%), inventories were little changed (-0.1%) in September, at $54.8 billion.

Of 15 trade groups, 10 reported lower inventories in September. Among the most notable movers were motor vehicles (-1.2%), metal products (-1.7%) and motor vehicle parts and accessories (-1.3%).

Gains were most apparent in the apparel (+5.0%) and machinery and equipment (+0.7%) trade groups.

The inventory-to-sales ratio edged down from its highest level of the year, from 1.27 in August to 1.26 in September. Following a brief spike in the fall of 2006, the ratio has remained relatively stable over the past 12 months.

The inventory-to-sales ratio is a key measure of the time, in months, that would be required to exhaust existing inventories if sales were to remain at their current level.

Chart 3 Inventories