MNI DATA ANALYSIS:Canada Sep Wholesale Sls Disappoint;3Q Slows>

By Yali N'Diaye

     OTTAWA (MNI) - Canadian wholesale sales contracted by 0.5% in 

September, while the market consensus had expected a 0.3% gain over the 

month, data from Statistics Canada showed Wednesday. 

     On a 12-month basis, sales growth accelerated to 3.8% from 3.4%, 

benefitting from a favorable base effect given the 0.9% drop in 

September 2017. 

     Overall details were poor, and indicated a slowdown in the third 

quarter that did not bode well for GDP. 

     Total sales rose 0.6% in the third quarter after expanding 0.9% the 

previous three months. Real sales, more relevant to GDP, were flat, 

posting their worst performance since the first quarter 2016. 

     The drop in sales, the second in a row, was accompanied by higher 

inventories (+0.6%), lifting the inventory-to-sales ratio to 1.38 in 

September, the highest level since April 2009. 

     - WIDESPREAD WEAKNESS 

     Details showed September sales weakened across 5 of 7 subsectors, 

representing 68% of total wholesale trade. Regionally, the weakness was 

also widespread with sales down in eight provinces. 

     Adding to the weakness was the fact that September's decline was 

volume related, as real sales fell 0.7% on the month. 

     Declines were led by personal and household goods (-1.6%) and 

machinery, equipment and supplies (-2.0%, with volumes down 2.3%). 

     The drop in machinery and equipment was a bad news for the Bank of 

Canada's narrative of a shifting growth composition increasingly relying 

on exports and business investment. Excluding machinery and equipment, 

sales would have been down 0.1%. For the third quarter as a whole, sales 

in that category rose 0.6% after a 2.3% gain in the second quarter, the 

slowest pace in a year. 

     Building material and supplies (+1.5%) and autos and parts (+0.3%) 

were the two subsectors to post gains. Sales excluding autos and parts 

fell 0.7% on the month. 

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

[TOPICS: MACDS$,M$C$$$]