Canada Wholesale Activity Less than Projected 2012.03.19

March 19, 2012 23:47

Statistics Canada reported Monday the country’s wholesale sales declined 1.0% to $49.0 billion in January 2012 as motor vehicle and parts sales (down 3.0%) made up three quarters of the decline. The decrease surprised analysts who projected a 0.4% increase. This was the second decline in three months following a previous uptrend that started in May 2011. Moreover, six of the seven subsectors posted sales declines with another large decrease including the miscellaneous wholesale subsector at a 2.5% sales decrease. Furthermore, volume in Canada’s wholesale trade went lower 1.0% in January. The country’s inventories experienced 0.9% increase with inventories amounting to $59.2 billion in January, a twelfth month of increases with the inventory to sales ratio increasing 1.21 from 1.18 in December 2011.

In other news, United States (US) Federal Open Market Committee vice chair William Dudley provided the Fed’s analyses and projections for the country’s economy. US reports have been positive with real gross domestic product growing at the 3.0% annual rate in the last quarter of 2011, the fastest rate since the first half of 2010. Additionally the average gain in monthly non-farm employment moved up to 256,000 in the first two months this year. Furthermore, the ISM nonmanufacturing index increased the third straight month in February and stands at the highest level achieved in a year. Yet, the Fed is cautious with optimism and stated the country’s long-run sustainable (potential) growth rate is around 2.25%. Furthermore, the Fed expects inflation will remain lower for some time.

The USDCAD is currently testing support at 0.9870 despite the fundamental weakness in the Canadian economy. The Canadian Dollar has been strengthening as the price of oil hovers nears $107 a barrel. If the support at 0.9870 is broken and Oil prices continue to rise, we expect the USDCAD to reach 0.9750.

Eugene Ross, Analyst

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