Typically, a major source of trade for Canada is its automotive sector. But in the first month of the year, automotive shipments fell so much that it wound up affecting the country’s wholesale trade industry collectively, according to newly released data.
Wholesale trade receipts dropped more than 3 percent in January from the previous month.
Wholesale trade receipts in January slipped to $53 billion from December, based on reported numbers from Statistics Canada. In U.S. dollars, that’s the equivalent of about $42 billion, The Wall Street Journal pointed out.
Much of the decline in value traced back to fewer vehicle shipment to foreign countries. Wholesalers saw a dip in shipments of 11 percent on a month-over-month basis, Statistics Canada revealed, a decline that came as a surprise to the more than one dozen economists interviewed by Bloomberg.
Largest dip in 7 years
This isn’t the first time that the wholesale trade industry has shrunk in size, but it has been awhile. The last instance in which the sector contracted was in 2008-09, at the height of the financial crisis, which Canada was able to handle relatively well compared to other industrialized nations. At that time, trade plummeted more than 4.5 percent.
As might be expected, auto sales in Canada over the same period dwindled as well. The Financial Post referenced from the Statistics Canada data that there was a 13 to 15 percent drop in car sales, largely influenced by losses in automotive parts. Not including the auto sector, wholesale trade eased just 1.3 percent.
The declining value of the Canadian dollar should be a boon for Ontario’s economy, an RBC report forecasts.Ontario economy set to outperform other provinces
The decline may ultimately prove to be a blip on the radar screen, as Canada’s economy is expected to perform well throughout 2015, particularly in Ontario. In the Royal Bank of Canada’s Provincial Outlook report, it pointed to Canada’s largest province as the part of the country that will demonstrate the most growth. Gross domestic product in Ontario is expected to appreciate to 3.3 percent from 2.5 percent in 2014, then likely settle right in between at 2.7 percent in 2016.
Craig Wright, RBC senior vice president and chief economist, indicated that plunging oil prices, the declining value of the Canadian dollar and low interest rates are setting up a growth scenario.
“The positive effects from the drop in oil prices and related developments will coalesce at a time when the provincial economy is already displaying rising momentum,” said Wright, referring to Ontario.
The RBC report noted that Ontario’s trade sector thrived in 2014, as merchandise exports swelled by 8 percent nominally. Other exports – such as consumer goods, motor vehicles and auto parts – also gained ground, up 14 percent and 8 percent, respectively.