Wholesale trade slips on slowing auto parts sales

Wholesale trade fell an unexpected 1.2% in February following three months of surging sales, according to government data released Wednesday.

Sales drops in the motor vehicle and parts, and machinery, equipment and supplies subsectors accounted for most of the month’s shortcomings, Statistics Canada said.

The largest decrease came in the auto sector, which slowed 4.4%, marking the first negative month for the industry since August 2009.

“To be certain, any disappointment in February is tempered by the sheer strength of the number set in the past months,” HSBC Securities Canada economist Stewart Hall said in a morning note. HSBC had projected a wholesale trade gain of 0.6% for the month.

The best performing subsector, in dollar terms, was the building material and supplies industry, which saw sales rise 1.5% in February.

In terms of volume, wholesale trade dropped 1.8%. Inventories edged up for the first time since November 2008 and by 0.1%.

But Hall says the month’s soft results won’t change the Bank of Canada’s monetary policy going forward. The central bank is widely expected to introduce a 25 basis point rate hike in June.

“Most, including ourselves will be inclined to chalk today’s softness in the wholesale number set to some overdue moderation in what has been a frenetic pace of activity for many months now,” Hall said.

After posting increases in January, Ontario and Quebec fell short in February. Ontario, which accounts for roughly half of all of Canada’s wholesale trade, saw sales drop 1.7%. In British Columbia, sales fell 4.3%. Sales in Saskatchewan rose, however, thanks in part to demand for agricultural supplies.

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