Overall sales rose by 0.5% in October to $43.9 billion, following a 1.1% increase in September. Four sectors reported stronger sales in October, led by a 2.4% gain in building materials and a 0.8% increase in the personal and household goods sector.

After remaining more or less unchanged in September, sales in the automotive products sector edged down 0.3%. Sales excluding the automotive products sector were up 0.7% in October.

Using constant dollars, which take price fluctuations into account, the volume of sales rose 2.0% to $49.2 billion in October. This was the sixth time in the past seven months that sales in constant dollars have risen at a faster rate than those in current dollars.

As many of the goods sold by wholesalers are imported, the recent rapid appreciation of the Canadian dollar against its US counterpart has led to lower prices and thereby reduced the value of sales when measured in current dollars. In October, the Canadian dollar appreciated a further 5.3% against the greenback.

Upturn in lumber sales gives a boost to building materials sector

Sales in the building materials sector increased by 2.4% in October to $6.3 billion, erasing all of the declines registered in the previous two months. Higher sales in the lumber and millwork trade group, which had been the major contributor to the previous two months' declines, accounted for most of the increase this month.

After plunging by a cumulative 20% over the previous three months, sales in the lumber and millwork trade group jumped 11.3% in October to $1.0 billion. The increase in wholesale sales came in spite of a further decline (-6.3%) in lumber exports, which fell for the third consecutive month. Nevertheless, while lumber exports have been affected by the fallout from the US housing crisis, the majority of products sold by lumber and millwork wholesalers are destined for the Canadian housing market, where demand remains fairly strong.

The building supplies trade group, which makes up some 60% of sales in the building materials sector, increased for the third time in four months, up 2.0% to $3.8 billion. This trade group has experienced a period of practically uninterrupted growth since the fall of 2003, buoyed by the strength of the renovation and construction market.

According to the latest survey of residential construction investment, spending on residential construction achieved a new record in the third quarter of 2007, reaching $24.3 billion, an increase of 9.0% over the same quarter in 2006.

Personal and household goods sector makes further gains

The personal and household goods sector followed up September's solid 2.3% rise with a 0.8% increase in October to $6.7 billion.

With the holiday season fast approaching, wholesalers of household and personal products put in a good performance in October, as sales rose 2.5% to $2.9 billion on the back of a 3.6% increase in September.

Wholesalers in the apparel trade group fared less well, as sales declined 3.5% to $760 million, while sales in the pharmaceuticals trade group edged up 0.3% to an even $3 billion.

Softening demand for motor vehicles pushes automotive sector lower

The weakening trend in the automotive sector showed little sign of easing in October as sales in this sector hit their lowest level in a year, edging down 0.3% to $7.7 billion.

Lower sales of motor vehicles (down 0.9% to $6.1 billion) were behind October's decline. Meanwhile, sales of motor vehicles and parts, which have seen little or no growth in recent months, registered their highest increase of the year, up 2.1% to $1.6 billion.

Having already been hit by weakening demand from the United States, motor vehicle wholesalers are now being confronted with a softening Canadian market. The latest figures from the New Motor Vehicle Sales Survey indicate that domestic auto demand has fallen in five of the past six months, reversing most of the gains made earlier in the year.

Strength in Western Canada and Ontario offsets significant drop in Quebec

The Prairie provinces and British Columbia both reported healthy gains in October, while Ontario posted a more modest increase. Meanwhile, Quebec and Newfoundland and Labrador both registered significant declines during October.

Sales in British Columbia were boosted (+2.0% to $4.5 billion) by the upturn in the lumber trade group, which had been the primary factor behind significant drops in the province over the past two months.

In Manitoba, higher demand for agricultural products helped drive sales up 8.9% in October to $1.2 billion. With only two months left in the year, the province is on course to record its highest annual growth rate in at least five years.

Sales in Saskatchewan (+3.9%) were also bolstered by stronger demand for agricultural products, while in Alberta, higher sales of machinery and electronic equipment were a major contributor to the province's fifth consecutive monthly gain (+0.7%).

Ontario's wholesalers chalked up their second consecutive monthly gain in October, as sales rose 0.9% to $21.6 billion. Higher demand for machinery and electronic equipment and personal and household goods were behind most of October's gain. Despite these recent increases, the sales trend for Ontario has remained fairly flat over the past six months due to the softening of the automotive market.

Wide-ranging declines contributed to a 3.2% drop to $8.3 billion in Quebec in October, halting a run of three consecutive increases. The sales trend for the province has seen a fairly healthy upward swing over the past year and a half.

In the Atlantic provinces, sales were held back by a large decline (-7.2%) in Newfoundland and Labrador, which was hit by lower sales in the food and machinery and electronic equipment sectors.

October also provided further evidence of the unprecedented boom in mining exploration and development in Nunavut, which experienced another large spike in sales (+312%) following a similar increase (+255%) in July.

Increase in inventories widespread

Wholesale inventories registered their eighth increase of the year in October, rising 0.6% to $55.4 billion.

Inventory levels were up for most trade groups, with 11 out of 15 recording an increase. The "other products" groups registered the largest jump, up 2.5% to $6.7 billion. Among other trade groups with significant rises this month were food products (+2.4%), building supplies (+1.7%) and machinery and equipment (+0.7%).

These increases were partially offset by the 3.9% decline in the motor vehicle inventories, the largest monthly decline in this trade group since March. Motor vehicle wholesalers have reduced their inventories by almost 20% from a February 2007 peak in line with the slowing demand for motor vehicles.

Faced with softening demand from the struggling manufacturing sector, wholesalers of metal products also continued to trim their inventory levels in October (-2.2%). This was the sixth consecutive monthly decline and brought inventories to their lowest level since May 2006.

With sales and inventories both rising at a similar rate in October, the inventory-to-sales ratio held steady at 1.26. Following a brief spike in the fall of 2006, the ratio has since remained relatively stable.

The inventory-to-sales ratio is a key measure of the time, in months, that would be required to exhaust existing inventories if sales were to remain at their current level.