OTTAWA – Canadian wholesale sales fell short of expectations in July as they held steady for the month at $55.4 billion, a hiccup among signs the economy is improving after a weak start to the year.
Economists had expected a gain of 0.7 per cent, according to Thomson Reuters.
Statistics Canada said three subsectors posted gains, led by the machinery, equipment and supplies group, to offset losses in other sectors.
In volume terms, wholesale sales fell 0.4 per cent.
“Still, despite the slight disappointment in today’s wholesaling data, the strong gain in manufacturing volumes reported last week, in addition to the healthy readings we expect from retailing to be released on Wednesday, still augur for a decent July GDP advance,” CIBC economist Nick Exarhos wrote in a brief note.
“That, in addition to the strong hand-off from the end of the second quarter, supports our view for a 2.7 per cent growth pace in the third quarter.”
The machinery, equipment and supplies subsector gained 1.0 per cent to $11.3 billion, its second consecutive increase, helped by the computer and communications equipment and supplies industry.
Wholesale sales in the motor vehicle and parts subsector rose 0.2 per cent to $10.3 billion in July, while the miscellaneous subsector rose 0.3 per cent to $7.0 billion.
The food, beverage and tobacco subsector had the largest decrease in dollar terms as it slipped 0.5 per cent to $10.7 billion.
The weaker than expected wholesale sales results came as TD Bank downgraded its outlook for the economy this year to growth of 1.2 per cent from its June forecast of 1.6 per cent.
“Next year will see a return to growth of about two per cent, still about 0.3 percentage points lower than our June call,” TD said in a report.
“Exports are a key underpinning to this firmer economic backdrop, highlighting Canada’s increasing dependence on factors outside our borders to propel growth.”
TD predicted the Bank of Canada would keep its key interest rate at 0.5 per cent until 2017.
In its latest monetary policy report, the Bank of Canada has forecast growth of 1.1 per cent this year and 2.3 per cent in 2016.