Bloomberg News

Canada August Wholesale Sales Rise 0.2% on Higher Prices

October 20, 2011

(Updates with analyst comment in fourth paragraph, currency trading in fifth paragraph.)

Oct. 20 (Bloomberg) -- Canadian wholesale sales rose for a fourth month in August, on higher prices for imported goods. Excluding the impact of prices, wholesalers recorded their biggest decline since May 2010.

Wholesale sales rose 0.2 percent in August to C$48.4 billion ($47.5 billion), Ottawa-based Statistics Canada said today. Economists surveyed by Bloomberg News forecast a 0.5 percent increase, the median of 15 estimates.

Data in August have shown a mixed picture for the economy during the month, as consumers and businesses sought to cope with market turmoil stemming from a deepening of Europe’s debt crisis and Standard & Poor’s downgrade of U.S. debt. That suggests the economy slowed from the 0.3 percent pace of growth recorded in July. Statistics Canada will report August GDP data on Oct. 31.

The wholesale data was “a little bit on the soft side,” said Michael Gregory, senior economist at Bank of Montreal’s BMO Capital Markets unit. “It does look like it’s going to be more of 0.1 or 0.2 percent maximum type of month” for growth in August.

The Canadian dollar pared gains following the report. The currency was 0.1 percent stronger at C$1.0195 per U.S. dollar at 10:50 a.m. in Toronto, from C$1.0205 late yesterday, after earlier rising as much as 0.7 percent. One Canadian dollar buys 98.09 U.S. cents.

August Data

Data released so far for the month of August show a drop in building permits, lower employment and a slowdown in housing starts. Offsetting that were strong gains in manufacturing sales and higher exports. Statistics Canada will release August retail sales data on Oct. 25 in the final major report ahead of the month’s GDP figures.

The central bank has held its key rate at 1 percent since September 2010, and Senior Deputy Governor Tiff Macklem said in a Sept. 27 speech policy makers would be “prudent” with interest-rate increases during a slow economic rebound threatened by weak U.S. demand and Europe’s debt crisis.

Investors have been paring bets the central bank’s next move will be a cut. The three-month overnight index swap rate, which is based on what investors expect the central bank’s rate will average during that period, rose to as high as 0.972 percent this week, from an October low of 0.908 percent recorded on Oct. 4. That’s still below the central bank’s 1 percent target for overnight loans between banks.

Recession Warnings

In recent weeks, Prime Minister Stephen Harper and Finance Minister Jim Flaherty have both raised the possibility that the global economy risks falling into recession if European leaders fail to solve their debt crisis. Flaherty, in a speech this week in Dublin, said time is running out for Europe before the crisis spreads.

The wholesale sales gain was led by a 1.7 percent increase in motor vehicles and a 1.3 percent rise in pharmaceuticals, the statistics agency said. Sales by wholesalers of food and beverages rose 0.5 percent.

Wholesale sales excluding the impact of price changes fell 0.9 percent in August. The statistics agency said the discrepancy between nominal and volume wholesale sales was partly attributable to a depreciation of the Canadian dollar during the month, which raised prices for imported goods.

Wholesale inventories increased 0.9 percent to C$57.2 billion, and the inventory-to-sales ratio rose to 1.18 in August from 1.17 in July.

Statistics Canada also said it revised its estimate of July’s wholesale sales gain to 0.9 percent from an initial estimate of 0.8 percent.

In a separate report, the agency also said that the number of Canadians receiving jobless benefits increased 6.6 percent to 568,560 on a seasonally adjusted basis in August.

From the year-ago month, the total number of recipients fell 15.8 percent, the Ottawa-based agency said.

--With assistance from Ilan Kolet in Ottawa. Editors: Paul Badertscher, Carlos Torres

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net


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