MNI DATA ANALYSIS: Autos Boost Canada December Wholesale Sales>

By Yali N'Diaye

     OTTAWA (MNI) - Canadian wholesale sales unexpectedly rebounded 0.3% 

to C$63.1 billion in December, boosted by autos and parts, data released 

Thursday by Statistics Canada showed. 

     The 12-month growth rate picked up to 1.7% in December from 1.1% in 

November. 

     Despite the positive headline, which also showed real sales rose 

0.3% on the month, details of the report were on the weak side, and did 

not bode well for wholesale trade contribution to fourth quarter GDP 

growth. 

     The sales estimate for November was revised down to -1.1% from 

-1.0%. 

     For the fourth quarter of 2018, overall sales contracted 0.4%, the 

largest drop since the first quarter of 2016, following a 0.6% increase 

the previous quarter. 

     For 2018 as a whole, wholesale sales rose 3.7%, not even half the 

pace of the 7.8% gain recorded in 2017, and the lowest growth rate since 

2016. Real sales growth also slowed down in 2018, to 2.1% from 5.3% in 

2017. 

     Inventories expanded by 1.9% to C$90.3 billion in December, 

recording their largest increase since December 2017, and surpassing the 

C$90 billion mark for the first time. As a result, the 

inventory-to-sales ratio climbed to 1.43, the highest level since 

November 1995. 

     --AUTOS LEAD GAINS 

     On a sector basis, much of the December sales increase was 

explained by autos and parts, which were up 3.7%, as volumes rose 3.9%. 

Excluding autos and parts, wholesale sales actually contracted 0.4% on 

the month. 

     Still, sales of autos and parts contracted by 1.2% in the fourth 

quarter, for an annual decrease of 5.0%, making it the sole subsector to 

post a decrease in 2018. 

     Meanwhile, sales of machinery and equipment fell 1.1% in December, 

on the back of a 1.8% drop in November, each time led by weaker volumes, 

a negative sign of investment activity in Canada. 

     Personal and household goods also declined in December, with sales 

down 3.2%, following a 2.4% drop the previous month, not boding well for 

household spending contribution to GDP in the fourth quarter. 

     Overall, sales increased in 4 of 7 subsectors, representing 64% of 

wholesale trade. Regionally, sales increased in six provinces, led by 

British Columbia. 

     Thursday's report adds some downside risk to the Bank of Canada's 

1.3% annualized GDP growth projection for the fourth quarter, although 

it is unlikely to be material enough to change the overall scenario. If 

anything, it reinforces the lack of urgency to bring the policy rate to 

neutral. 

--MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

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