MNI DATA ANALYSIS: Canada Feb Wholesale Sales -0.8%,Disappoint>

By Yali N'Diaye

     OTTAWA (MNI) - Canada wholesale sales fell 0.8% in February to 

C$62.8 billion, the largest decline and the lowest level since September 

2017, with details showing weakness across sectors and regions, data 

from Statistics Canada showed Monday. 

     That being said, in its latest projections released last Wednesday, 

the Bank of Canada already slashed its annualized real GDP growth 

projection for the first quarter to 1.3% from 2.5%, which should be 

followed by a rebound of 2.5% in the second quarter. 

     So Monday's data did fit the first quarter slowdown scenario, 

although it remains to be seen whether first quarter growth will  match 

the central bank's estimate, and even more importantly, to which extent 

the expected rebound in the second quarter will be realized. 

     --WEAK VOLUMES 

     What makes February's figures particularly disappointing is that 

the weakness was all volume related, with sales volumes, more relevant 

to real GDP, down 0.9%, the largest drop since June last year. 

     February's decrease more than offset the 0.7% gain in January, even 

after January's real growth estimate was revised up from 0.5%. 

     On a 12-month basis, volumes rose 4.1% in February after a 5.4% in 

January. 

     According to MNI's calculations, should March nominal and real 

sales remain stable, nominal sales would decrease 0.4% in the fourth 

quarter and real sales 0.3%, indicating a negative contribution to GDP. 

     --BROAD BASED DECLINES 

     Activityweakened across regions and sectors, with four of seven 

subsectors reporting lower sales, representing 64% of wholesale trade. 

     Miscellaneous sales led the decrease, with a 3.7% drop on the month 

to C$7.7 billion, the lowest level since December 2016. 

     The category registered the largest decline in dollar amount, 

explaining 60% of the overall wholesale sales dollar amount decrease 

over the month. 

     Excluding miscellaneous sales, wholesale sales were down 0.3%. 

     Autos were also down in February (-2.1%), with sales excluding 

autos and parts still down 0.5%. 

     That being said, machinery, equipment and supplies, an indicator of 

investment activity in Canada, a key pilar of the BOC's growth rotation 

scenario, were resilient, with sales edging up 0.1% on the month after 

rising 1.7% in January. 

     At the retail level, while sales rose 0.4% in February, core sales 

disappointed as sales excluding motor vehicles and parts were flat. 

     Regionally, wholesale sales decreased in seven provinces in 

February. 

     --FLAT INVENTORIES 

     Inventories were flat on the month after rising 1.1% in January. 

     With sales down 0.8%, the inventory-to-sales ratio rose to 1.33, 

the highest level since March 2016. 

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

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