Canada June wholesale sales rise for 3rd straight month; economy likely to shrink in Q2

Canada’s wholesale sales rose for the third straight month in June, beating market expectations as this sector of the economy provided some ray of hope in an otherwise dwindling economy. Also, the Canadian economy is expected to have shrunk during the second quarter.

June wholesale trade rose 0.7 percent from May to a seasonally adjusted 56.42 billion Canadian dollars (USD43.89 billion), data released by Statistics Canada showed Monday. Traders had anticipated a 0.1 percent gain, according to economists at Royal Bank of Canada.

Further, May’s data were revised slightly upward to an increase of 1.9 percent compared to the earlier 1.8 percent estimate. In volume terms, sales rose 0.6 percent month over month. For the second quarter, Canadian wholesale trade advanced 0.6 percent on a non-annualized basis, the data agency said.

According to the Bank of Canada forecasts, the economy is expected to shrink in the second quarter. However, a rebound is anticipated in the current third quarter as the impact of the Alberta wildfires will dissipate and the federal government’s fiscal-stimulus plan shall kick in by then.

The auto industry was a major contributor toward the June wholesale gain. Motor vehicle and parts posted the largest increase in dollar terms in June, rising 3.1 percent to CAD11.17 billion. Excluding the auto sector, Canadian wholesale sales rose by a more muted 0.1 percent in June.

In addition, personal and household goods rose 2 percent to CAD8.35 billion, and the machinery and equipment component advanced 1.1 percent to CAD11.07 billion. Offsetting those gains was a 3.1 percent decline in food and beverages.

However, wholesale inventories fell 0.1 percent to CAD72 billion or the sixth month-over-month decline in eight months. The inventory-to-sales ratio, or the time in months required to eliminate stockpiles if sales were to remain at current levels, fell to 1.28 in June from 1.29 in May.

Meanwhile, the wholesale industry accounts for the biggest portion of the country’s services sector, which in turn makes up around two-thirds of Canadian economic output.