materials sector was boosted by higher sales of lumber and millwork (+3.4%), which rose for the second consecutive month, and building supplies (+1.8%). Meanwhile, sales of metal products continued their recent slide (-2.9%).

The recent rises in lumber sales follow four months of major declines, as lumber wholesalers struggle to cope with a slumping US housing market and a weaker pricing environment. After falling continuously since January, lumber exports rose 5.7% in September.

For their part, wholesalers of building supplies saw their sales rise by 1.8% in September to $3.6 billion, following a 2.3% rise in August. This group has experienced a period of very strong growth since the end of 2003, as building supply wholesalers continue to benefit from rising investment in the housing sector, especially in Western Canada.

The downturn in the metals group was the third straight monthly decline. In spite of the recent weakness in this trade group, sales have grown significantly over the past year or so, with the booming oil sector driving much of this demand.

Farm products sector posts a fourth consecutive rise
The farm products sector continued to rebound from its recent May low, as sales receipts rose 4.6% in September to $466 million. As was the case in previous months, most of these gains were attributable to higher livestock sales. Many of these animals are destined for the export market, which also rose sharply during the month. Nevertheless, with restrictions on older cattle yet to be lifted following the bovine spongiform encephalopathy scare, revenues from the export of live cattle remain well below the same period in 2002, which was the last full year of trade prior to the border closing.

Declines concentrated in British Columbia and Ontario
Wholesalers in British Columbia (-5.4%) and Ontario (-2.2%) were the most affected by September’s drop; sales in most of the remaining provinces and territories actually rose during the month.

Lower sales by wholesalers of machinery and equipment as well as of “other” products (mainly wholesalers of agricultural, chemical and recycled products) accounted for most of the decline in British Columbia, which had also recorded a large increase in sales during the previous month. As was the case in August, sales in Ontario were hit by lower motor vehicle sales. Motor vehicles account for about one-quarter of the sales in this province.

The largest increase came in Manitoba (+4.9%), where sales were bolstered by higher demand for agricultural products such as fertilizers and seeds.

Inventories-to-sales ratio hits a three year high
Following three consecutive monthly increases, wholesale inventories remained relatively constant in September, edging up 0.1% to $53.0 billion. However, with sales showing a significant drop during the month, the inventory-to-shipment ratio jumped from 1.25 to 1.27 in September, which was its highest level since August 2003. Most of the increase in this ratio has come about in the past few months, and has been due in large part to a rapid buildup of machinery and equipment and metals inventories.

More details, by sector and geographical region, here.
Find more economic indicators at MDM’s Databank.Release taken from Statistics Canada, www.statcan.ca

Canadian wholesalers ended the third quarter on a bit of a down note as the industry recorded its largest monthly drop so far this year. Despite the drop, sales growth in the third quarter accelerated thanks to the gains made in the previous two months.

After rising in the previous two months, sales fell by 1.6% in September to $41.8 billion. Five of the seven wholesale sectors, representing 85% of sales, declined in September, with wholesalers of automotive products (-3.4%) and machinery and electronic equipment (-3.3%) bearing the brunt of the decrease. The only positive notes came in the building materials (+1.0%) sector, where sales were bolstered by a rebound in lumber and millwork sales, and the farm products sector (+4.6%), which continued its string of recent gains.

The longer term trend for the wholesale industry remains positive. Since the third quarter of 2003, wholesalers have enjoyed a period of strong growth, making it one of the economy’s fastest growing sectors during this period.

In constant dollars, sales dropped by 2.2% in September.

Growth picks up in the third quarter
September’s downturn masked an otherwise healthy third quarter for wholesalers, as sales increased by 1.6% compared with a modest 0.4% rise in the previous quarter. While nearly all sectors recorded higher sales during the third quarter, the most notable increase came in the other products” sector (+4.3%), where sales were boosted by an increase in fertilizer exports following the conclusion of a new pricing agreement. The only downturn was in the building materials sector (-1.5%), where slumping sales of lumber were the main culprit.

On the provincial front, wholesalers in Saskatchewan were the main beneficiaries of the rise in fertilizer exports, as the province recorded its strongest quarterly growth in wholesale sales (+10.9%) in five years. Wholesalers in Nova Scotia (+5.9%) and British Columbia (+3.7%) also recorded increases substantially above the national average during the quarter.

Demand for machinery and electronic equipment falls
Sales of machinery and electronic equipment declined 3.3% to $8.6 billion in September, as all three trade groups in this sector registered declines. Total sector sales had risen in three of the past four months.

Within the sector, wholesalers of computers and electronic equipment registered their fourth decline in the past five months, as September sales fell 4.2% to $2.6 billion. After posting a strong start to the year, sales in this trade group have been somewhat sluggish of late. Computer sales were notably soft during the month, as the delay in the launch of a major update to a widely used operating system may have led some buyers to hold off on their purchases.

Most of the remaining drop in the sector came from the machinery and equipment trade group, which recorded a significant decline (-3.8%) after four months of lackluster growth. Much of this equipment is destined for the manufacturing sector and, according to the latest release of the Business Conditions Survey, manufacturers remain fairly pessimistic about their near term prospects, due in part to dissatisfaction with current order levels.

Auto sales continue to retreat from July high
Motor vehicles sales continued to retreat from their recent July peak. After dropping 10.1% in August, sales fell a further 4.4% in September to $6.3 billion. The recent declines in this trade group are due in part to waning US demand for many of the large vehicles made in Canada, many of which pass through the wholesale sector. Exports of passenger cars fell for the third consecutive quarter between July and September.

Rebound in lumber sales helps to boost building materials sector
The building