Wholesale trade in Canada suffered an unexpected decline in June, falling for the second time in three months as sales in the automotive sector continue to lag.
Nationwide, wholesalers sold $41.5-billion worth of goods and services in June, down 0.6 per cent from May, according to a Statistics Canada report released Friday. It's the second decline in three months for wholesale trade, which are sales of goods and services to manufacturers.
Wholesale performance was much worse than analysts had predicted. Economists expected a 0.4 per cent increase based on the estimates of 13 analysts surveyed by Bloomberg News.
“On the whole it was a disappointing report,” said Mark Chandler, a financial markets economist with Scotia Capital in Toronto. “Looking at it broadly, there is a real slowdown in the wholesale level. We're also seeing inventory climbing, which could be a problem. Inventories may need to be pared back.”
Mr. Chandler said the report isn't drastic enough to change interest rates set by the Bank of Canada, which has increased rates seven times since September to slow economic growth and keep inflation in check.
“It's a bit of a volatile series but he important thing is where the Bank of Canada stands on the cycle. It was a close call but it decided to keep rates on hold.,” Mr. Chandler said.
“For the Bank of Canada to move it really takes a release that's way off the expectations and this just wasn't that drastic. It shouldn't have much of a market affect because the Bank of Canada's stance is well appreciated and well justified,” he said.
The automotive sector suffered a blow in June with sales dropped 2.1 per cent, the fourth decline in the past five months. Food, beverages and tobacco also slid 0.8 per cent.
Meanwhile, sales of farm product recorded the most growth of any sector, up 4.7 per cent from a month earlier. Sales of building materials also grew by 0.6 per cent as the renovation and construction boom continues in Canada.
The declining sales slowed down growth for the quarter ending in June. In the second quarter, sales grew just 0.5 per cent compared to much healthier increases of 2.9 per cent and 2.5 per cent in the previous two quarters.
Lumber sales dropped 8.1 per cent in the second quarter, while sales of motor vehicles slid 2.2 per cent.
Sales fell most dramatically in P.E.I., where wholesalers saw their sales tumble 14.7 per cent, due largely to a major slide in the sale of food products, mainly fish.
Saskatchewan also suffered a sizable decline, with wholesale trade falling 5.5 per cent, hampered in part by lagging sales of fertilizer and agricultural chemicals.
Only two provinces recorded growth in June and it was no surprise that Alberta was one of them. Wholesale trade in that province jumped 2.4 per cent over the previous month. Compared to a year earlier, sales in Alberta have increased by a staggering 16.9 per cent.
Growth was also recorded in Quebec, where sales rose 1.5 per cent.
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