MNI DATA IMPACT: Canada May Wholesales -1.8% Vs +0.5% Forecast>

By Greg Quinn

     OTTAWA (MNI) - Canadian wholesale sales fell the most in more than 

three years in May led by automobiles and equipment in the energy hub of 

Alberta. Inventories reached the highest since 1995 relative to sales. 

     The 1.8% decline to C$63.8 billion in sales compares with the MNI 

economist median for a 0.5% increase. The weakness is the mirror image 

of April's revised 1.6% gain that was much stronger than economists 

projected. 

     Motor vehicle and parts sales fell 4.3% to C$11.2 billion in May, 

more than reversing April's 2.7% increase, Statistics Canada said Monday 

from Ottawa. Farm supplies dropped 11.1% to C$2.2 billion. 

     The report breaks a five-month streak of increases and showed 

declines across a majority of industries, breaking a recent pattern of 

reports showing a broad based pickup in the second quarter. The Bank of 

Canada counted on domestic spending to prop up the economy earlier this 

month when it held its key lending rate at 1.75% despite global trade 

risks.

     One trouble spot the central bank has identified in Canada's 

economy emerged in the May wholesale report. The ratio of inventories to 

sales climbed to 1.43 in May, the highest since October 1995, from 1.39 

in April. Rising inventories can sometimes signal weak demand, and 

stockpiles have now increased for nine months in a row. 

     Like last week's retail sales report, food and beverages helped 

lead declines in May wholesale sales, falling 1.2% to C$11.9 billion. 

     Sales in the province of Alberta dropped 8.7% in May, unwinding an 

April gain.

     Statistics Canada also said the decline in auto wholesaling 

coincided with a decline in cars and trucks being imported into the 

country in May. 

     The report may take some shine off of economist forecasts for 

Canada's annualized economic growth to top 2.5% in the second quarter. 

     Excluding price changes, sales volumes fell 1.9% in May, more than 

reversing April's 1.5% increase. The volume figures have a bigger 

influence on the May GDP figures that will be released on July 31. 

--MNI Ottawa Bureau; +1-613-314-9647: greg.quinn@marketnews.com 

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