Canada's wholesale slump confirms bad ending to 2012

Tue Feb 19, 2013 10:41am EST
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By Louise Egan

OTTAWA (Reuters) - Canadian wholesale trade shrank more than expected in December in the latest sign the economy is sputtering, adding pressure on the government as it seeks to strike a balance between spending cuts and growth-boosting measures in its next budget.

Wholesale trade fell 0.9 percent on a reversal of November's gains in the computer and communications equipment industry, Statistics Canada said on Tuesday.

Market players surveyed by Reuters had forecast, on average, a 0.4 percent drop in wholesale activity in the month.

Wholesale trade was down 0.9 percent by volume and inventories fell 0.6 percent.

The data all but confirms that the economy stalled or even contracted in December. Exports and factory sales were also weak and on Friday, Statscan will release retail sales, the final piece of the puzzle for the month.

"There is little that retail sales can do ... to offset what is likely to be a minor contraction in industry level real GDP for December," said Mazen Issa, a strategist at TD Securities.

"This is especially true when taken together against a backdrop of slowing housing and construction activity," he wrote in a note to clients.

Most economists agree the Bank of Canada's projection of 1 percent annualized fourth-quarter growth is too high. And with the weak hand-off from December, the bank's expectation of 2.3 percent first-quarter growth is also under question.   Continued...