March 19, 2012 / 2:53 PM / 6 years ago

Canada wholesalers weak in Jan, lower growth seen

OTTAWA (Reuters) - Weakness in the auto sector unexpectedly dragged down Canadian wholesale trade in January, Statistics Canada said on Monday, adding to evidence of weak economic growth at the start of the year.

Wholesale trade fell 1 percent from December, offsetting the 1 percent gain made in the previous month, pulled down primarily by motor vehicles and parts as well as by agricultural supplies.

The decrease surprised market players who had forecast, on average, 0.3 percent sales growth in the month for wholesalers. In volume terms, which matters most for gross domestic product, sales were also down 1 percent.

“Taken together with the month’s weak manufacturing shipments figure, January is shaping up to be a soft month,” said Emanuella Enenajor, analyst at CIBC World Markets, in a note to clients.

The manufacturing sector’s recovery faltered in January as factory sales slid 0.9 percent and exports fell after two months of gains.

“Although Thursday’s retail print could point to healthy gains in that sector, we now expect January GDP to post at best a middling gain from the prior month,” Enenajor said.

GDP grew a hefty 0.4 percent in December. January is seen growing at half that rate or less, and analysts said first-quarter annualized growth may come in lower than 2 percent.

Canada recovered from the 2008-09 recession more quickly than the United States and recovered all the jobs lost by early 2011. But the star performer in the G7 group of rich nations is slowing down this year and is set to underperform its neighbor and top trade partner.

Even so, upward revisions to some of last year’s GDP numbers have led to speculation the Bank of Canada could move towards an interest rate increase well before the U.S. Federal Reserve, albeit not imminently.

“For now, with growth appearing to be more subdued to start the year, the bank is likely to remain comfortably sidelined until international risks have been mitigated,” said Mazen Issa, Canada macro strategist at TD Securities.

Six of Statistics Canada’s seven wholesale trade subsectors reported a drop in sales in January. Three-quarters of the decrease came from the motor vehicles and parts subsector and the miscellaneous subsector, which includes agricultural supplies such as fertilizer.

Sales of motor vehicles and parts fell 3 percent, not quite erasing the 3.7 percent gain in December. In the miscellaneous category, sales fell 2.5 percent mainly due to a 6.3 percent slide in agricultural supplies. Exports of fertilizer products plummeted 32 percent in the month as weak global demand dampened prices.

Wholesale inventories grew 0.9 percent, extending a trend that began at the start of 2011.

Compared with January of 2011, overall wholesale trade grew 4 percent and inventories expanded by 9.1 percent.

Reporting by Louise Egan; Editing by James Dalgleish and Peter Galloway

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