Statistics Canada publishes three reports each month which are closely tied together and contain some overlap − new motor vehicle sales, wholesale trade and retail trade. As one example, the same car may appear in all three reports. Foreign importers, and a number of domestics, distribute their motor vehicles to dealerships through wholesale units.

Wholesale Trade Figures Contain Two Interesting Variations
The wholesale trade figures are a little different than the other two series in several important respects. They include a greater foreign trade component. First, they include significant levels of export sales, whereas the other two series are mainly domestic. Second, they incorporate an interesting anomaly with respect to constant dollars (i.e., real volumes). Many products sold by wholesalers are first imported. At times when the Canadian dollar has been through a period of appreciation, there can be resulting price declines. In such a circumstance, constant-dollar wholesale sales can exceed current-dollar levels.

Canada's Wholesale Trade in May +2.9% Year over Year
The year-over-year wholesale trade figure in May 2008 was +2.9%, almost exactly the same as for retail trade (+2.8%). The biggest problem areas in wholesale trade were in motor vehicles (-15.9% year over year) and lumber and millwork (also -15.9%). Both were mainly the result of lower export sales to a U.S. market that has gone sour on auto sales and new home construction.

There was one shining star for wholesale trade in the latest month. The "other products" sector, which includes fertilizers and fertilizer products, was +23.4% year over year and +9.5% month to month. Due to worldwide strong demand for agricultural products, exports sales of fertilizers were almost 60% higher than in the same month of last year. Fertilizer price increases accounted for about half of that.

Retail Sales Show that Motorists are Altering Their Behavior
Analysts watch retail sales closely because they are a prime indicator of what to expect from consumer spending in the national accounts. In turn, consumer spending comprises between 55% and 60% of total Gross Domestic Product (GDP) in Canada. (The figure is 70% in the United States, due to a lower dependence on foreign trade.)

The first accompanying graph below shows that retail sales growth, on a year-over-year three-month smoothed basis, has been moderating for the past four months. It has now fallen to +3.8%, which is its lowest level since March 2004, four years ago. In terms of actual dollars, the year-over-year retail sales gain was only +2.8%. This was below the latest increase in the all-items Consumer Price Index (CPI), at +3.1% for June 2008.

One of the most interesting results from the retail trade figures pertains to gasoline sales. Gasoline station sales were +2.4% in May versus April, which is a solid increase. However, gasoline prices were +8.8% month over month. The disparity between the two numbers indicates that there has been some adjustment in drivers' behavior. It would seem that motorists are cutting down on their driving activity, thereby reducing the real volume of gasoline sales.

Construction-related retail sales growth rates (second graph) remain well below most earlier periods, but they are still at solidly positive levels (about +4.0% smoothed). The biggest non-auto hits in the latest month on a year-over-year actual basis came, somewhat surprisingly, in computer and software stores (-1.4%) and shoe, clothing accessories and jewellery stores (-0.9%).

Motor Vehicle Sales are Driving into some Potholes
New and used motor vehicle retail sales in Canada were down slightly (-0.9%) on a three-month "smoothed" year-over-year basis in May 2008. However, the drop on an actual basis (-3.6%) was a little sharper. Neither of these figures is nearly as alarming as what is happening south of the border. In the United States, smoothed year-over-year new and used motor vehicle and parts sales are -8.3% and the actual decline has been -9.5%.

In Canada, further evidence of the changing pattern of sales in the auto industry can be found in the new motor vehicle sales report for May. Sales of trucks were -7.6% year over year in May, while passenger cars were +7.3%. The share of trucks within total sales was the lowest since October 2005.

The "trucks" category includes minivans, sport-utility vehicles, light and heavy trucks, vans and buses. The automakers lobbied hard to have SUVs included as trucks in order to avoid the tight fuel-efficiency standards required by passenger cars. By the way, in the passenger car segment, the clear leader is the "overseas-built" category (as opposed to North American-built), +15.3% year over year in terms of number of units in May.

As can be seen from the accompanying charts, Canadian total retail sales have been following U.S. levels downward over the past four months. The U.S. decline has been led by an auto sector that has been speeding downhill for eight straight months.

Retail construction lies within the commercial category of non-residential building construction. For CanaData's latest assessment of the square-footage construction outlook in Canada, see the Market Insights story dated July 21, 2008.