Wholesale business picking up; inventories staying pat

Wholesale trade was up again in February, the fourth consecutive monthly increase, Statistics Canada figures indicate. But the 0.2% gain was not enough to convince wholesalers to budge from their current inventory levels.

Wholesale inventories remained more or less unchanged at $42.7 billion. Since the start of 2001, wholesale inventories have dropped 3.3%. Prior to 2001, levels were rising since early 1999.

Major sectors reducing their inventories were automotive products (-5.6%), industrial machinery (-1.1%), and food products (-0.7%). Wholesale automotive product inventories have been falling since the start of 2001. Previously, levels were increasing over the last several years, despite briefly weakening during the spring of 2000.

Similarly, wholesalers of industrial machinery have seen their inventories cascade downwards since the start of 2001. This followed a period of generally rising sales since early 1999.

The wholesale inventory-to-sales ratio fell slightly to 1.26 in February, a historically low level. The ratio has been generally falling since the start of 2001.

Wholesales sales rose a modest 0.2% in February, a fourth consecutive monthly increase. Gains in 8 of the 11 wholesale sectors were largely offset by declines in the remaining three, resulting in sales of $33.8 billion. Wholesalers with strong ties to household consumption continued to see healthy sales in February. Wholesale sales mainly oriented to industry were mixed; although there were pockets of strength, sales were on balance relatively weak.

Overall wholesale sales have rebounded since the fall of 2001. Sales have climbed 2.8% since September, when they fell 1.1%. Prior to September, wholesale sales levelled off during the summer of 2001 following an extended period of general increase.