Higher retail margins and profits for most trade groups

Most retail trade groups reported higher gross margins and operating profits in 2005. Overall, gross margins among store retailers rose 5.5% over the previous year.

The largest growth in margins was reported at furniture stores (+13.3%), home furnishing stores (+10.4%) and gasoline stations (+10.4%). Margins also rose for fuel dealers (+7.5%) and electronic shopping and mail-order houses (+3.3%).

However, computer and software stores continued to struggle, with margins falling 5.2% in 2005. This was the fifth consecutive annual drop since the Y2K peak when their gross margins grew 37% between 1999 and 2000.

Part of this deterioration in the bottom line can be attributed to the erosion of store sales by online sales of computers and software.

According to the Canadian Internet Use Survey, 32% of Canadians went online to download or purchase computer software in 2005. Revenue generated from the sale of computer software from electronic shopping and mail-order retailing establishments rose a staggering 121.1% in 2005.

Overall, operating profits for store retailers rose 6.2%, while for non-store retailers, the gain was 10.1%.

Alberta retailers enjoy strong margin growth, but costs impede profits

Store retailers in Western Canada reported the strongest growth in their gross margins. Margins were up 9.2% in Alberta, 8.4% in Saskatchewan, 7.0% in Manitoba, and 5.9% in British Columbia.

Alberta retailers reported the largest increases in associated costs despite growth in their gross margins. The cost of goods sold was up 9.1% over 2004, compared to 6.3% in neighbouring Saskatchewan and 5.2% in Quebec.

Alberta retailers also reported the biggest increase in operating expenses over the previous year (+8.8%). Labour costs rose 7.4% — the biggest rise amongst all the provinces.

As a result, operating profits as a percentage of revenue earned for Alberta retailers was one of the lowest among the provinces (4.0%). This was in contrast to retailers in Ontario (6.1%) and British Columbia (5.8%).

Gasoline stations and fuel dealers weather the storm

Gasoline station retailers and fuel dealers experienced strong sales in 2005. Gasoline prices, as measured by the Consumer Price Index, increased 12.8% in 2005 over 2004. This was due in part to the devastation of Hurricanes Katrina and Rita along the Gulf Coast of the United States.

Most Canadian gasoline stations recorded double-digit increases in their cost of goods sold. This was especially true among gasoline station chains.

The cost of goods sold, this would include the cost of all merchandise sold in a typical chain gasoline station, not just gasoline, rose 18.8%. Labour and other operating expenses were up 5.7%.

As a result, despite the strong sales, operating profits as a percentage of revenues for chain gasoline stations rose only slightly from 9.6% in 2004 to 10.0% in 2005.

Fuel dealers, those retailing heating oil, liquefied petroleum and other fuels to end consumers, reported a 7.5% increase in margins and an 8.2% increase in operating profits over 2004.

Advertising the big expense

Overall, store retailers continued to control expenses relative to revenue in 2005. Despite operating expenses among store retailers that rose 5.3% to $81.0 billion in 2005, operating expenses represented 20.7% of operating revenues, virtually unchanged from 20.8% the year before.

Labour costs rose at the slowest rate of major expense components, up 3.2% from 2004. As a proportion of total operating expenses, labour remuneration remained virtually unchanged at 51%.

Advertising represented the biggest expense, especially for retail chain stores, where this cost rose 12.3%.

Increased aggressiveness in advertising to stimulate sales may have contributed to this rise. In addition, amongst all their advertising options, online advertising spending continues to grow as more retailers start to see the internet as a necessary component of brand advertising.

Advertising costs more than doubled for retail chains of computer and software stores, as well as other miscellaneous store retailers. Clothing stores, gasoline stations, and new car dealers also reported large increases.

Inventories down slightly

Store retailers saw their inventory-to-sales ratio drop from 1.69 in 2004 to 1.62 in 2005, which translates to a two day drop in their inventory levels. Lower ratios mean lower storage costs and less risk of having to liquidate merchandise if demand changes.

Shoe, clothing accessories and jewellery stores maintained the largest amount of stock, just shy of four months worth. This was followed by sporting goods, hobby, music, and book stores with just over a three-month supply.

Miscellaneous store retailers, as well as clothing stores, made the greatest adjustment in their inventory levels in 2005. Miscellaneous store retailers shaved off almost 10 days worth of inventory, while clothing stores saw inventory retention drop by almost five days.

Retail trade by province and territory, independent and chain stores
2005
	Operating revenues	Gross margin	Operating revenues, 2004 to 2005	Operating revenues
	$ millions		% change	% share
Newfoundland and Labrador	5,874	1,485	2.4	1.5
Prince Edward Island	1,459	372	3.8	0.4
Nova Scotia	10,913	2,824	2.0	2.8
New Brunswick	8,736	2,079	4.8	2.2
Quebec	88,108	21,708	5.3	22.5
Ontario	144,715	39,358	4.3	37.0
Manitoba	14,071	3,574	6.1	3.6
Saskatchewan	11,882	2,964	6.8	3.0
Alberta	51,493	12,604	9.1	13.2
British Columbia	52,254	14,261	5.0	13.4
Yukon	429	114	5.7	0.1
Northwest Territories	653	169	9.3	0.2
Nunavut	278	95	9.6	0.1
Canada	390,866	101,607	5.3	100.0

Retail trade by trade group, independent and chain stores
2005
	Operating revenues	Operating expenses	Gross margin	Operating profit	Operating revenues, 2004 to 2005
	$ millions				% change
New car dealers	78,892	8,983	10,417	1,434	4.5
Used and recreational motor vehicles and parts dealers	17,346	3,395	3,940	545	5.9
Gasoline stations	39,595	4,739	7,723	2,984	10.5
Furniture stores	9,387	2,980	3,806	826	5.0
Home furnishings stores	5,603	1,937	2,171	233	7.6
Computer and software stores	2,068	451	474	23	1.9
Home electronics and appliance stores	10,509	2,780	3,134	354	9.5
Home centres and hardware stores	18,569	4,286	5,436	1,150	8.3
Specialized building materials and garden stores	5,114	1,336	1,533	197	3.0
Supermarkets	62,337	12,643	15,134	2,491	6.2
Convenience and specialty food stores	13,919	3,057	3,483	426	2.1
Beer, wine and liquor stores	14,235	2,257	6,282	4,025	4.4
Pharmacies and personal care stores	25,693	6,586	7,847	1,262	5.2
Clothing stores	16,783	6,901	8,174	1,274	5.5
Shoe, clothing accessories and jewellery stores	5,296	2,168	2,554	386	4.5
General merchandise stores	44,017	9,387	11,310	1,923	2.7
Sporting goods, hobby, music and book stores	10,147	3,202	3,727	525	5.0
Miscellaneous store retailers	11,357	3,979	4,462	482	-2.4
Totals	390,866	81,067	101,607	20,541	5.3

Non-store retail sales by major commodity group
2005
	Sales of goods and services	Sales of goods and services, 2004 to 2005	Sales of goods and services
	$ thousands	% change	% share
Food and beverages (excl. meals and lunches)	861,189	-11.5	6.8
Health and personal care	1,504,198	-0.3	11.9
Clothing, footwear and accessories	686,998	4.4	5.4
Housewares (non-electric) and household supplies	221,022	-1.7	1.7
Home furnishings and electronics	1,210,589	-0.9	9.6
Hardware, home renovation and lawn and garden products	246,837	-6.6	1.9
Sporting and leisure goods	803,835	-0.5	6.3
Household and automotive fuels, oils and additives	6,169,746	17.5	48.7
Services (incl. meals and lunches, repairs, rental and leasing)	376,793	20.4	3.0
Other goods	584,550	3.4	4.6
Total	12,665,755	7.5	100

Non-store retail by industry
2005
	Operating revenues	Gross margin	Operating profit	Operating revenues, 2004 to 2005	Operating revenues
	$ thousands			% change	% share
Electronic shopping and mail-order houses	3,953,575	1,620,463	296,769	0.5	31.0
Vending machine and coffee service operators	651,293	336,595	43,942	-4.0	5.1
Fuel dealers	6,520,859	1,383,109	484,913	17.8	51.1
Direct selling businesses	1,641,767	789,209	113,424	-5.2	12.9
Total	12,767,494	4,129,377	939,048	7.5	100

Note to readers

This release combines data from three surveys: the annual Retail Store Survey, covering independent retail outlets, the annual Retail Chain Survey, covering chain retailers, as well as the Non-store Retail Survey.

The information in this report is based on the 2002 North American Industry Classification System (NAICS).

Gross margin is obtained by subtracting the cost of goods sold from the total operating revenues. The ratio is expressed as a percentage of the total operating revenues. This measure is also known as the return on sales.

Operating profit is obtained by subtracting the total operating expenses plus the cost of goods sold (opening inventory plus purchases and direct costs minus closing inventory) from the total operating revenues.

The inventory-to-sales ratio is obtained by dividing the closing inventory by the average monthly total operating revenue. The average monthly revenue is obtained by dividing annual revenue by 12.

Electronic shopping comprises establishments engaged in retailing all types of merchandise using the Internet. However, it excludes those establishments involved in a combination of store retailing and Internet retailing in the same establishment. This dual activity is classified to the store portion of retailing.

Operating revenues for wholesalers hit $626.5 billion in 2005, up 7.6% from 2004. The rate of growth was slightly slower than the 9.1% increase in the previous year.

Between 2000 and 2005, the annual average growth rate in operating revenues was around 5.9%. Revenues have increased at a strong pace every year since the turn of the millennium, except for a slowdown in 2001 and 2003.

Wholesalers in the petroleum sector accounted for more than half the annual gain in the industry's total operating revenues in 2005.

Revenues of petroleum wholesalers surged 25.0% from 2004 to $114.6 billion, largely the result of higher prices for crude oil. This increase came on the heels of a 29.5% gain the year before.

In 2005, petroleum wholesalers accounted for 18% of total industry revenues, the largest share among the industry's 17 groups. This proportion was up from 16% in 2004.

The strong performance in the petroleum group largely offset slower growth in two other groups (metal products and lumber) where revenues had recorded strong double-digit increases in 2004. Furthermore, revenues of motor vehicle wholesalers, the third largest wholesale group, fell again in 2005.

Canada's wholesale industry accounts for about 6.4% of economic output as measured by gross domestic product.

A number of economic factors had an impact on total wholesale trade in Canada in 2005. Canadian wholesalers benefited tremendously from a gain in exports, which rose 5.6% despite a stronger Canadian dollar. Although this was slower than the pace in 2004, energy exports recorded the strongest growth among all export products in 2005.

In addition, imports increased by 6.8% in 2005. This followed a 6.1% gain in 2004. Wholesalers bring in a large proportion of all imported products. For the second consecutive year, the higher dollar meant more investment in foreign machinery and equipment, as well as higher Canadian demand for products from abroad.

The wholesale sector's growth reflects globalization in other respects as well. As Canadian manufacturing operations relocate abroad, many wholesalers-distributors have been forced to adapt to a much different operating environment.

To provide goods and services to their clients, many of these wholesalers have had to take on outsourcing responsibilities, and to manage much more complex logistics and warehousing activities. These additional functions have contributed to the sector's growth and increased its importance to the economy.

Most wholesale groups post gains

Gains in operating revenue were posted by 12 of 17 industry groups, accounting for about 81% of total revenues. The only groups to record declines were farm products, alcohol and tobacco, motor vehicles, lumber and millwork, and agents and brokers.

In addition to wholesalers of petroleum products, operating revenues of wholesalers of metal products, who are important in construction, increased 16.5% in 2005; however, that was only half their rate of growth the year before. The slump in steel prices that began in 2005 following China's entry into the export market was offset in part by strong demand resulting from numerous investments in non-residential construction in Western Canada.

Wholesalers of machinery and equipment recorded revenues of more than $47.7 billion, up 14.9% from 2004. This was the fourth consecutive annual increase. Since 2003, the strong Canadian dollar translated into lower prices for imports, with Canadian business substituting less expensive foreign products for goods made in Canada.

For the motor vehicle group, it was the third annual decline in a row. Its revenues fell 2.0% from 2004 to $72.4 billion. The motor vehicle group accounted for 12% of total revenues in 2005, down from about 13% the year before.

Apart from petroleum, wholesalers of metal products and lumber and millwork were the major contributors to the total increase in revenue in 2004 with increases of 35.0% and 17.7% respectively. In 2005, both experienced a slowdown.

After recording the strongest growth over the last three years in 2004 (+17.7%), revenues for wholesalers in the lumber and millwork group slipped 0.3% to $14.4 billion. Part of the slowdown was due to lumber prices, which fell by about 8.6%. Meanwhile, the Canada Mortgage and Housing Corporation reported a decrease in housing starts in 2005. In addition, lumber exports fell 9.7%. Wholesalers account for nearly one-third of exports of lumber products.

Wholesale gross margin edges down

The gross margin as a proportion of operating revenue for all wholesalers edged down from 17.5% in 2004 to 17.4% in 2005. The growth in gross margin reveals the extent to which wholesalers manage to increase revenues while paying the lowest prices for merchandise they purchase for resale.

With the exception of agents and brokers, who by definition do not take title of the goods they resell, 11 of the 16 remaining trade groups posted higher gross margins than the national average (17.4%). In particular, wholesalers of apparel (33.3%), office and professional equipment (32.9%), household and personal goods (28.5%) and motor vehicle parts and accessories (27.1%) posted higher gross margins.

Operating profit margin slightly lower in 2005

Overall operating profit margins for wholesalers as a percentage of total operating revenue declined from 4.7% a year earlier to 4.6% in 2005. Gains were, however, recorded for wholesalers of apparel, alcohol and tobacco products and other products.

Despite these increases, some major wholesale industries did not fare as well in 2005 as in 2004. These included agents and brokers, metal products, lumber and millwork and pharmaceutical products industries.

Wholesale trade
2005
Trade group	Operating revenues	Gross margin	Operating profit	Operating expenses	Operating revenues 2004 to 2005
	$ millions				% change
Farm products	18,244	2,188	732	1,456	-4.3
Petroleum products	114,591	5,020	2,337	2,683	25.0
Food products	79,670	12,194	3,213	8,982	2.1
Alcohol and tobacco products	7,559	1,653	1,006	647	-2.7
Apparel	9,609	3,204	743	2,461	8.5
Household and personal goods	30,641	8,724	1,153	7,571	5.9
Pharmaceutical products	30,790	5,575	1,332	4,243	7.2
Motor vehicles	72,387	5,914	1,781	4,132	-2.0
Motor vehicle parts and accessories	19,227	5,204	1,506	3,699	1.9
Building supplies	46,411	11,634	2,858	8,776	10.8
Metal products	17,320	3,115	967	2,148	16.5
Lumber and millwork	14,359	1,754	599	1,155	-0.3
Machinery and equipment	47,735	11,297	2,457	8,840	14.9
Computers and other electronics	30,065	6,499	1,602	4,897	4.1
Office and professional equipment	21,245	6,991	1,290	5,701	3.2
Other products	59,849	13,550	3,474	10,076	4.5
Total merchants	619,702	104,516	27,050	77,467	7.7
Agents and brokers	6,834	...	1,685	2,487	-3.8
Total, wholesale trade	626,536	104,516	28,735	79,954	7.6

Note to readers

The information in this report is based on the North American Industry Classification System (NAICS).

Gross margin is obtained by subtracting the cost of goods sold from the total operating revenue. The ratio is expressed as a percentage of total operating revenue. This measure is also known as the return on sales.

Operating profit is obtained by subtracting the total operating expenses plus the cost of goods sold (opening inventory plus purchases and direct cost minus closing inventory) from the total operating revenue. The ratio is expressed as a percentage of total operating revenue.

Operating expenses-to-operating revenues ratio is obtained by dividing the total operating expenses by the total operating revenue. The ratio is expressed as a percentage of total operating revenue.

Total retail sales fell 0.2% in January to an estimated $33.4 billion, mainly due to the 2.4% sales decline in the automotive sector. Excluding the automotive sector, retail sales rose by 0.9%.

The automotive sector tends to dictate which direction overall retail sales go on a monthly basis. However, both the automotive sector and the non-automotive sectors have contributed about the same to overall growth on an annual basis. Sales growth in the non-automotive sectors averaged 5.6% in the past five years while overall retail sales growth averaged 5.4% in the same period.

Partially offsetting the January decline in the automotive sector were widespread gains in all other sectors. Strong sales increases were seen in the furniture, home furnishings and electronic stores (+2.1%), clothing and accessories stores (+1.6%) and pharmacies and personal care stores (+1.5%) sectors.

Moderate increases were seen in general merchandise stores (+1.0%), building and outdoor home supplies stores (+1.0%), miscellaneous retailers (+0.8%), and food and beverage stores (+0.1%).

Overall price effects were minimal in January as the declines in gasoline prices were offset by increases in other items, such as clothing and alcoholic beverages. Once price changes were taken into account, total retail sales fell by 0.1%.

Automotive sector puts the brakes on retail sales

The price of gasoline fell by 3.1% in January from December, according to the Consumer Price Index, leading to a 3.5% drop in sales at gasoline stations in January, after two months of strong sales gains.

Sales at new car dealers fell by 2.0%, after a 3.4% increase in December. Demand for new passenger cars and trucks declined by 3.3% in January, according to the New Motor Vehicles Sales Survey. In general, sales at new car dealers have been rising since mid-2006 after a period of offsetting declines and increases.

In the furniture, home furnishings and electronic stores sector, furniture stores sales rose by 4.5% in January. Consumer shopping trends at these types of stores appear to be changing in the last couple of years as sales over the holiday season continue to flood over to January, possibly due to the proliferation of gift cards.

Sales at beer, wine and liquor stores increased by 3.7% in January, more than offsetting the declines in November and December. Annual sales growth at these stores in 2006 was 5.5%, the highest growth rate in four years. In contrast, supermarket sales fell by 1.0% in January, after increasing by 0.9% in December. Sales at supermarkets have been relatively flat in 2006, as they experienced their lowest year of sales gains (+0.6%) since 1996.

After several months of large sales fluctuations, recently affected by deviations from normal weather patterns, sales at clothing stores continued to climb in January (+3.0%), making up for the lost sales in October and November. Shoe, clothing accessories and jewellery stores fell by 2.7%, partially due to a larger than usual sales decline at jewellery stores.

Pharmacies and personal care stores sales increased for the third consecutive month (+1.5%) in January. These stores saw phenomenal annual growth in 2006, reaching double digits for the first time since this series began (+10.8%) in 1991.

Sales in Ontario fall back on trend after strong December sales

Overall, 11 out of 13 provinces and territories experienced sales gains in January. Sales in Ontario fell by 2.1% after a strong 3.0% increase in December. The decline was mainly due to lower sales at new car dealers and gasoline stations. The Ontario retail sales trend has been relatively flat for most of 2006. New Brunswick (-1.1%) also experienced sales declines in January.

Retailers in the Prairie provinces did well in January with an average of 1.3% sales growth among the three provinces. Sales in Saskatchewan continued to be strong in January (+1.7%) after a 2.4% increase in December.

Manitoba's retail sales growth of 1.2% in January was the third monthly increase in a row. Sales in this province had been steadily increasing with only two monthly declines in 2006.

Retailers in Alberta experienced a 1.2% increase in January, rising from a short period of flatness. In 2006, retail sales in Alberta reached the highest double-digit growth ever recorded for any province (+16.1%) since the series began in 1991.

Retail sales in British Columbia continued to rise in January (+1.5%), continuing an upward trend after a pause in November.

Related indicators for February

Estimates from the Labour Force Survey show little overall change in the labour market in February as employment edged up slightly (+14,000). The unemployment rate edged down 0.1 percentage points to 6.1%.

Based on preliminary sales data from the automotive industry, the number of new motor vehicles sold in February declined approximately 4% due to lower sales for both passenger cars and trucks.

The seasonally adjusted annual rate of housing starts was 196,200 units in February, down from 248,500 units in January, according to Canada Mortgage and Housing Corporation.

Retail sales
	January 2006	October 2006r	November 2006r	December 2006r	January 2007p	December 2006 to January 2007	January 2006 to January 2007
	Seasonally adjusted
	$ millions					% change
Automotive	10,898	10,965	11,190	11,602	11,325	-2.4	3.9
New car dealers	6,147	6,312	6,361	6,577	6,446	-2.0	4.9
Used and recreational motor vehicle and parts dealers	1,367	1,463	1,471	1,509	1,486	-1.5	8.7
Gasoline stations	3,383	3,190	3,359	3,516	3,392	-3.5	0.2
Furniture, home furnishings and electronics stores	2,306	2,335	2,355	2,369	2,418	2.1	4.9
Furniture stores	822	806	812	810	846	4.5	2.9
Home furnishings stores	448	449	462	471	468	-0.6	4.4
Computer and software stores	139	126	126	130	131	0.9	-5.6
Home electronics and appliance stores	897	955	955	959	973	1.5	8.5
Building and outdoor home supplies stores	2,037	2,108	2,130	2,186	2,208	1.0	8.4
Home centres and hardware stores	1,646	1,714	1,736	1,769	1,787	1.0	8.6
Specialized building materials and garden stores	391	394	394	417	421	0.9	7.7
Food and beverage stores	7,163	7,389	7,380	7,394	7,399	0.1	3.3
Supermarkets	5,144	5,280	5,276	5,322	5,268	-1.0	2.4
Convenience and specialty food stores	771	813	815	799	810	1.4	5.1
Beer, wine and liquor stores	1,248	1,296	1,290	1,273	1,320	3.7	5.8
Pharmacies and personal care stores	2,073	2,263	2,268	2,282	2,316	1.5	11.7
Clothing and accessories stores	1,808	1,931	1,877	1,972	2,004	1.6	10.8
Clothing stores	1,380	1,468	1,428	1,499	1,544	3.0	11.8
Shoe, clothing accessories and jewellery stores	428	462	449	473	460	-2.7	7.6
General merchandise stores	3,843	3,937	3,862	3,954	3,992	1.0	3.9
Miscellaneous retailers	1,677	1,694	1,648	1,678	1,692	0.8	0.9
Sporting goods, hobby, music and book stores	858	861	830	860	863	0.5	0.7
Miscellaneous store retailers	819	833	818	819	829	1.2	1.2
Total retail sales	31,806	32,623	32,710	33,438	33,354	-0.2	4.9
Total excluding new car dealers, used and recreational motor vehicle and parts dealers	24,292	24,849	24,879	25,352	25,421	0.3	4.7
Provinces and territories
Newfoundland and Labrador	514	505	520	534	536	0.2	4.1
Prince Edward Island	123	122	125	129	130	0.8	5.2
Nova Scotia	933	930	941	956	960	0.4	2.9
New Brunswick	724	726	746	769	761	-1.1	5.0
Quebec	7,048	7,217	7,265	7,366	7,383	0.2	4.7
Ontario	11,620	11,662	11,741	12,091	11,833	-2.1	1.8
Manitoba	1,047	1,097	1,119	1,127	1,140	1.2	8.9
Saskatchewan	940	975	977	1,000	1,017	1.7	8.2
Alberta	4,425	4,803	4,784	4,861	4,920	1.2	11.2
British Columbia	4,323	4,474	4,382	4,493	4,559	1.5	5.5
Yukon	36	39	37	40	40	0.1	11.6
Northwest Territories	51	50	51	52	53	1.0	4.3
Nunavut	21	22	22	21	24	11.8	12.6
r revised p preliminary

Retail sales
	January 2006	December 2006r	January 2007p	January 2006 to January 2007
	Unadjusted
	$ millions			% change
Automotive	8,744	9,878	9,179	5.0
New car dealers	4,716	5,452	5,049	7.1
Used and recreational motor vehicle and parts dealers	955	1,118	1,046	9.5
Gasoline stations	3,072	3,308	3,084	0.4
Furniture, home furnishings and electronics stores	1,997	3,558	2,143	7.3
Furniture stores	703	935	747	6.2
Home furnishings stores	377	623	401	6.5
Computer and software stores	144	159	140	-3.2
Home electronics and appliance stores	773	1,841	855	10.6
Building and outdoor home supplies stores	1,394	1,753	1,564	12.2
Home centres and hardware stores	1,147	1,435	1,287	12.3
Specialized building materials and garden stores	248	318	277	11.7
Food and beverage stores	6,352	8,814	6,615	4.1
Supermarkets	4,813	6,009	4,956	3.0
Convenience and specialty food stores	661	876	702	6.2
Beer, wine and liquor stores	878	1,928	958	9.0
Pharmacies and personal care stores	1,993	2,670	2,256	13.2
Clothing and accessories stores	1,297	3,347	1,456	12.3
Clothing stores	1,003	2,442	1,133	12.9
Shoe, clothing accessories and jewellery stores	294	905	323	9.9
General merchandise stores	2,966	5,992	3,160	6.6
Miscellaneous retailers	1,434	2,518	1,484	3.4
Sporting goods, hobby, music and book stores	758	1,511	780	2.9
Miscellaneous store retailers	677	1,007	704	4.0
Total retail sales	26,178	38,531	27,857	6.4
Total excluding new car dealers, used and recreational motor vehicle and parts dealers	20,507	31,961	21,763	6.1
Provinces and territories
Newfoundland and Labrador	395	633	420	6.5
Prince Edward Island	94	149	100	7.4
Nova Scotia	756	1,138	791	4.6
New Brunswick	581	877	620	6.7
Quebec	5,664	8,027	5,987	5.7
Ontario	9,631	14,340	9,973	3.5
Manitoba	854	1,286	938	9.8
Saskatchewan	771	1,132	848	9.9
Alberta	3,656	5,541	4,148	13.4
British Columbia	3,688	5,281	3,935	6.7
Yukon	28	43	31	12.7
Northwest Territories	42	59	46	9.1
Nunavut	18	25	20	12.3
r revised p preliminary

Wholesale sales declined 0.5% in January to $42.7 billion, reversing some of the 2.7% gain made in December. Significant drops in the automotive products (-4.6%) and personal and household goods (-4.5%) sectors were behind all of decline in January. Both of these sectors had posted substantial gains in December.

The remaining five wholesale sectors, representing 67% of overall sales, all registered increases in January, led by the building materials and machinery and electronic equipment sectors.

Ontario bore the brunt of the decline in January, reversing most of the gains it had made in the previous two months. Most other provinces and territories recorded higher sales in January, with notable increases coming in both the Prairie and Atlantic provinces.

Sales in constant dollars, which remove the effects of price fluctuations to isolate the change in volumes, were unchanged in January.

Automotive sector reverses course after a strong December

After posting a substantial increase in December (helped in part by the introduction of new models) the automotive sector reversed course in January, dropping 4.6% to $8.0 billion. Lower sales of motor vehicles (-5.6%) were entirely to blame, as sales of motor vehicle parts and accessories remained essentially unchanged (-0.1%).

The drop in motor vehicle sales reduced by more than half the strong gains made in December, and continues a recent pattern of large monthly swings. While such swings are not that unusual in this trade group, the North American industry is facing a particularly challenging period at present as automakers struggle to adapt their product lines to meet consumer demands for more fuel efficient vehicles.

Personal and household goods sector declines after a strong holiday season

Sales of personal and household goods declined 4.5% in January to $6.1 billion, bringing to an end a string of three consecutive monthly increases. Two of the three trade groups in this sector posted lower sales, with only the apparel trade group showing a gain.

The largest drop (-7.6%) came in the household and personal products trade group, where monthly receipts hit their lowest level since July 2006. Nevertheless, sales in this trade group remained significantly higher than a year ago thanks to very strong retail sales, which last year posted their best performance since 1997.

Pharmaceutical wholesalers gave up most of the gains they made in December, as January sales fell 3.7%. This was only the second decline in the past six months for this group, which continues to benefit from increasing consumer expenditures on pharmaceutical products.

Following a very strong December, apparel wholesalers posted another solid increase (+3.9%) in January, as monthly sales hit their highest level in a year. This was the third increase in four months for this trade group, which had seen a significant decline in sales in early 2006.

Building materials' sector makes a strong start to the year

Wholesalers of building materials made a strong start to the year, up 3.3% to $6.3 billion. All three trade groups advanced, with the strongest growth coming from the lumber and millwork and building supplies trade groups.

January's rise in lumber sales (+9.9%) was the highest monthly increase in over three years for this trade group, and also marked the fifth increase in six months. However, the recent increases come after a series of significant declines which had seen lumber sales fall by some 20% in the first half of 2006.

Much of this lumber is exported and exports have also picked up somewhat of late after hitting a three and a half year low in November 2006.

Machinery and electronic equipment sector boosted by higher computer sales

Sales in the machinery and electronic equipment sector increased by 1.3% in January to $8.9 billion, more than reversing the small decline in December.

The biggest increase in this sector came in the computer and other electronic equipment trade group (+2.7%), which rose for the third time in four months, with the machinery and equipment trade group (+0.9%) accounting for most of the remaining growth.

Sales in this sector have done particularly well over the past three years, as Canadian businesses have taken advantage of the strong Canadian dollar to invest in new equipment (much of which is priced in US dollars). In December, machinery and equipment imports surpassed the $10.0 billion mark — a level not seen since the record high in November 2000 during the peak of the information and technology boom.

According to the survey of private and public investment intentions for 2007, overall investment in machinery and equipment is projected to grow by a further 4.5% this year.

Sales decline concentrated in Ontario, while most other provinces increase

Ontario (-3.2%) bore the brunt of the decline in January, reversing much of the gain made over the previous two months. The drop was largely attributable to lower sales of motor vehicles.

The decline in Ontario masked an otherwise healthy month for the rest of the country, as wholesale sales in both the Prairie (+4.7%) and Atlantic (+5.1%) provinces recorded strong advances.

Most of the gains in the Prairie region came in Alberta (+4.7%), which benefited from strong sales of food products and building materials. January's increase was the highest in the province since April 2005 and follows a slight easing of growth in the last quarter of 2006.

January also proved to be a good month for wholesalers in Manitoba (+8.3%), as the province registered its largest monthly increase since April 2004. Stronger sales of machinery and equipment and "other products" (mainly agricultural products) were behind much of the January increase.

In the Atlantic provinces, Nova Scotia, New Brunswick and Prince Edward Island all recorded healthy increases in sales. Newfoundland and Labrador, which has led the region in growth over the past two years, was the only province to register a decline.

Inventories resume their rise after December drop

Following a significant decline in December, inventories resumed their upward momentum in January, rising 0.8% to $54.1 billion.

Overall, 10 out of 15 trade groups, representing some 75% of inventories, reported higher inventories in January, with the most significant increases coming in the household and personal products, food and motor vehicle parts and accessories trade groups.

After registering a fairly large drop in December, the inventory-to-sales ratio moved back up from 1.25 to 1.27 in January. There has been a significant rise in the ratio over the past six months, prior to which the ratio had remained fairly stable since February 2005. The ratio measures the amount of time (in months) that it would take to exhaust inventories at the current rate of sales.

Wholesale merchants' sales
	January 2006	October 2006r	November 2006r	December 2006r	January 2007p	December 2006 to January 2007	January 2006 to January 2007
	seasonally adjusted
	$ millions					% change
Total, wholesale sales	41,516	41,485	41,787	42,918	42,707	-0.5	2.9
Farm products	456	484	466	454	456	0.5	-0.1
Food, beverages and tobacco products	7,399	7,654	7,658	7,513	7,608	1.3	2.8
Food products	6,742	6,999	7,007	6,886	7,008	1.8	3.9
Alcohol and tobacco	657	656	651	627	600	-4.3	-8.6
Personal and household goods	5,958	6,123	6,189	6,430	6,144	-4.5	3.1
Apparel	957	750	735	789	820	3.9	-14.4
Household and personal products	2,419	2,650	2,812	2,833	2,618	-7.6	8.2
Pharmaceuticals	2,581	2,723	2,643	2,809	2,705	-3.7	4.8
Automotive products	8,593	7,436	7,714	8,353	7,972	-4.6	-7.2
Motor vehicles	7,072	5,870	6,148	6,822	6,441	-5.6	-8.9
Motor vehicle parts and accessories	1,522	1,565	1,566	1,532	1,531	-0.1	0.6
Building materials	5,917	5,842	5,902	6,055	6,253	3.3	5.7
Building supplies	3,546	3,577	3,624	3,623	3,702	2.2	4.4
Metal products	1,195	1,274	1,250	1,383	1,400	1.2	17.1
Lumber and millwork	1,176	990	1,028	1,048	1,152	9.9	-2.1
Machinery and electronic equipment	8,487	8,821	8,913	8,826	8,941	1.3	5.3
Machinery and equipment	4,064	4,102	4,197	4,184	4,222	0.9	3.9
Computer and other electronic equipment	2,539	2,651	2,681	2,650	2,723	2.7	7.2
Office and professional equipment	1,885	2,067	2,035	1,992	1,997	0.3	5.9
Other products	4,706	5,126	4,944	5,286	5,333	0.9	13.3
Total, excluding automobiles	32,923	34,049	34,073	34,564	34,735	0.5	5.5
Sales, province and territory
Newfoundland and Labrador	224	237	244	261	254	-2.7	13.1
Prince Edward Island	35	34	38	40	43	8.6	24.1
Nova Scotia	538	556	532	522	570	9.2	5.9
New Brunswick	396	415	419	418	436	4.5	10.2
Quebec	7,685	7,828	7,924	7,988	7,967	-0.3	3.7
Ontario	21,166	20,689	21,002	22,030	21,333	-3.2	0.8
Manitoba	1,191	1,023	999	1,006	1,090	8.3	-8.5
Saskatchewan	1,013	1,168	1,188	1,249	1,275	2.1	25.9
Alberta	4,971	5,163	5,267	5,155	5,396	4.7	8.5
British Columbia	4,267	4,337	4,146	4,220	4,303	2.0	0.8
Yukon	11	10	7	10	15	45.5	38.4
Northwest Territories	19	20	19	19	25	29.4	35.2
Nunavut	1	2	1	2	2	8.6	24.1
r revised p preliminary

Sales of new motor vehicles finished strongly in 2006, after a weak September and October following the removal of dealer incentive programs. Sales through the summer months were helped by dealer promotions such as employee pricing and cash-back rewards. Before the summer spike, sales had been relatively stable from the end of 2005 through the first half of 2006.

Based on preliminary sales data from the automotive industry, the number of new motor vehicles sold in February declined approximately 4% due to lower sales for both passenger cars and trucks.

Sales plunge for North American-built passenger cars

Passenger car sales fell 7.0% in January to 70,722 vehicles. This decrease was due entirely to lower sales of North American-built passenger cars which plunged 11.0%. This decline in North American-built passenger cars follows two large monthly sales gains in November (+9.4%) and December (+8.4%). Sales of overseas-built passenger cars increased 1.4% in January, a second consecutive monthly increase.

Declines in passenger car sales in January partially offset the gains in the preceding two months. Sales had rebounded in November (+5.4%) and December (+6.1%) following a 7.7% decline in October. Previously, passenger car sales had been relatively flat during the second half of 2005 through to the third quarter of 2006.

Consumers purchased more trucks than cars

Consumers preferred trucks over passenger cars in January, purchasing 73,415 trucks for an increase of 0.5% over December. This was the fourth consecutive monthly increase for trucks (which include minivans, sport-utility vehicles, light and heavy trucks, vans and buses), and the highest sales level since July 2005.

At the beginning of 2006, truck sales were fairly flat before spiking in August with the introduction of dealer incentive programs. Sales fell in September, offsetting some of the gains made in July and August. Truck sales rebounded in the fourth quarter, and continued to rise at the start of 2007.

Truck sales took 51% of the new motor vehicle market share in January. This was only the second time in eight years that more trucks were sold than passenger cars. In 2006, the average market share for trucks was about 48%.

Sales down in most provinces

Six provinces posted lower new motor vehicle sales in January. Manitoba (-6.1%) posted the largest drop, offsetting a 6.0% gain in December. British Columbia and Quebec followed, each with a decline of 4.6% during the month. Sales in Ontario also fell in January, declining 4.0%. After three consecutive monthly increases, sales of new motor vehicles also decreased in Newfoundland and Labrador (-4.5%) and New Brunswick (-1.0%) in January.

On the heels of a 12.4% surge in new motor vehicles sales in December, Alberta sales edged up an additional 0.2% in January to 22,342 vehicles. Sales of new motor vehicles in Alberta had been strong through the first half of 2006 before slowing in September.

Prince Edward Island (+7.7%) posted the largest sales gain, achieving the highest sales level since November 2005. Saskatchewan (+1.2%) and Nova Scotia (+0.7%) also posted sales gains in January.

New motor vehicle sales
	January 2006	December 2006r	January 2007p	January 2006 to January 2007	December 2006 to January 2007
	Seasonally adjusted
	number of vehicles			% change
New motor vehicles	136,795	149,044	144,136	5.4	-3.3
Passenger cars	70,788