Canada: Wholesale trade, July 2018

Wholesale sales rose for the third time in five months, up 1.5% to $63.9 billion in July, more than offsetting the 0.9% decline in June. Sales were up in four of seven subsectors, representing approximately 66% of total wholesale sales.

The personal and household goods; food, beverage and tobacco; and motor vehicle and parts subsectors led the gains in July, while the miscellaneous subsector posted the largest decline.

In volume terms, wholesale sales increased 1.2%.

Increase in July attributable to higher sales in four of seven subsectors

The personal and household goods subsector rose for the second consecutive month, up 4.2% to $9.2 billion in July. Sales were up in five of six industries, led by the textile, clothing and footwear, and personal goods industries. In volume terms, sales in the subsector increased 4.6%.

Following two consecutive months of declines, sales in the food, beverage and tobacco subsector were up 2.6% to $12.0 billion, mainly on the strength of higher sales in the food industry (+2.4%). The gain in July was partly attributable to an increase in prices as sales in the industry were up 1.6% in volume terms.

Sales in the motor vehicle and parts subsector increased 2.4% to $11.1 billion, the first gain in four months. While increases were reported in all three industries, the motor vehicle industry (+2.0%) contributed the most to the overall gain in July.

Of the three subsectors posting declines in July, the miscellaneous subsector was the largest contributor, edging down 0.2% to $8.2 billion. Two of the subsector’s five industries declined in July, accounting for approximately 41% of the subsector’s sales.

Sales up in six provinces

Sales increased in six provinces in July, which together represented 97% of total wholesale sales in Canada. Quebec and Ontario accounted for most of the gain.

Sales in Quebec increased for the third time in four months, up 3.2% to $11.9 billion in July. Six of seven subsectors increased, led by the personal and household goods (+5.8%) and the food, beverage and tobacco (+5.0%) subsectors. Sales in the personal and household goods subsector increased after two consecutive declines, reaching their highest level on record, while sales in the food, beverage and tobacco subsector increased for the second consecutive month.

Wholesale sales in Ontario rose for the second month in a row, up 1.1% to $32.6 billion in July, on the strength of higher sales in four of seven subsectors. The motor vehicle and parts subsector (+3.1%), which rose after three consecutive monthly declines, and the personal and household goods subsector (+4.0%), which increased for the second consecutive month, contributed the most to higher sales in Ontario.

In Alberta, sales increased for the third time in five months, up 2.5% in July to $7.0 billion. The machinery, equipment and supplies subsector (+4.9%) contributed the most to the gain. The gain in this subsector was attributable to higher sales reported in the construction, forestry, mining and industrial machinery, equipment and supplies industry.

Sales in British Columbia rose 0.7% to $6.7 billion in July, on the strength of higher sales in the food, beverage and tobacco and the building material and supplies subsectors. Both subsectors increased following two consecutive monthly declines.

In dollar terms, the Atlantic provinces reported the largest decline in July. Sales in Newfoundland and Labrador decreased 4.6% to $354 million, on the strength of lower sales in the miscellaneous subsector.

The food, beverage and tobacco subsector contributed the most to the decline in Nova Scotia (-1.0%), New Brunswick (-0.8%) and Prince Edward Island (-0.8%).

Inventories rise in July

Wholesale inventories increased for the fifth time in seven months, up 1.4% to $87.1 billion in July. Gains were recorded in six of seven subsectors, representing 86% of total wholesale inventories.

In dollar terms, the personal and household goods subsector (+4.3%) recorded the largest gain, on the strength of higher inventories in five of six industries. This was the third consecutive monthly increase for the subsector.

Inventories in the building material and supplies subsector (+2.2%) grew for the fifth consecutive month in July. The increase was mostly attributable to gains in the electrical, plumbing, heating and air-conditioning equipment and supplies industry (+4.1%).

The food, beverage and tobacco subsector (+1.8%) posted a second consecutive monthly increase, mainly due to higher inventories in the food industry (+2.0%).

The machinery, equipment and supplies subsector (+0.6%) rose for the fifth time in seven months, on the strength of the farm, lawn and garden machinery and equipment industry (+1.5%).

The lone subsector to decline in July was motor vehicle and parts, down 0.8% following three consecutive monthly gains.

The inventory-to-sales ratio was unchanged at 1.36 in July. The ratio is a measure of the time in months required to exhaust inventories if sales were to remain at their current levels.

StatsCanada

Canada: International transactions in securities, July 2018

Foreign investment in Canadian securities reached $12.7 billion in July, mainly from acquisitions of federal government bonds. At the same time, Canadian investment in foreign securities totalled $13.1 billion, led by record purchases of foreign bonds.

Foreign investment in federal government bonds resumes

Foreign investment in Canadian securities reached $12.7 billion in July, up from $10.3 billion in June. Overall, foreign investors acquired Canadian bonds and, to a lesser extent, equities, but reduced their exposure to money market instruments.

Non-resident acquisitions of Canadian bonds totalled $11.1 billion in July. Foreign investors acquired $5.2 billion of federal government bonds. This was the first monthly investment this year. From January to June, foreign divestment in federal government bonds totalled $33.9 billion. Non-resident investors also added $3.8 billion of private corporate bonds to their holdings in July, the lowest level since January. Canadian long-term interest rates were up by 22 basis points in July. The Bank of Canada raised its benchmark overnight interest rate by 25 basis points to 1.5% in July, the second increase so far this year. In general, interest rates and bond prices move in opposite directions.

Foreign investors reduced their holdings of Canadian money market instruments by $379 million in July, the fourth consecutive month of divestment. Lower foreign holdings of federal government and federal government enterprise paper was moderated by investment in private corporate paper. Canadian short-term interest rates were up by 15 basis points and the Canadian dollar appreciated slightly against its US counterpart in the month.

Foreign investment in Canadian equities increased to $2.0 billion in July from $1.4 billion the previous month. The investment activity was concentrated in listed shares in the month. Canadian stock prices edged up in July.

Canadian investors acquire foreign bonds at a record pace

Canadian investment in foreign securities totalled $13.1 billion in July, following an $11.2 billion investment in June. Purchases of debt instruments were moderated by sales of equities in the month, an investment pattern generally observed since March.

Canadian investment in foreign debt securities reached a record $13.9 billion in July. Acquisitions of non-US foreign bonds and US Treasury bonds were the main contributors. Canadian investors acquired $44.9 billion of foreign bonds from January to July, with nearly 90% in instruments denominated in foreign currencies. These acquisitions mainly targeted bonds issued by foreign governments. The level of investment in 2018 has already surpassed the record investment for one year set in 2006 ($43.8 billion). In 2006, acquisitions were mainly in foreign bonds denominated in Canadian dollars, also referred to as maple bonds, as foreign corporations were active raising funds in the Canadian credit market prior to the global financial crisis. US short-term interest rates were up by five basis points, while US long-term rates declined slightly in July.

Canadian investors reduced their holdings of foreign shares by $796 million, the fourth divestment in five months. The reduction largely targeted non-US foreign shares in July.

StatsCanada

Canada: New housing price index, July 2018

Nationally, new home prices were up for a second consecutive month in July.

New Housing Price Index, monthly change

Builders in 15 of the 27 census metropolitan areas (CMAs) surveyed reported higher prices in July, pushing the Canada-level index up 0.1%.

The largest gain was in London (+0.5%), where builders reported higher construction costs and favourable market conditions as the primary reasons for the increase. This marked the ninth consecutive monthly price rise in this CMA. According to the Canada Mortgage and Housing Corporation, single-family home completions in London grew 41.5% year to date in July compared with the same period in 2017. Single-family homes include row, single, and semi-detached houses.

Higher prices for new homes in London reflect increased demand, coinciding with annual growth in employment (+4.0%) and in population (+1.8%) in July, as well as a tight resale market. According to the Canadian Real Estate Association, new listings in this CMA were down 17.0% year to date in July, compared with the same period in 2017.

New home prices edged up 0.1% in Toronto in July, the first increase since October 2017. In contrast, prices in Vancouver (-0.2%) declined for the first time since February 2017.

New Housing Price Index, 12-month change

New house prices rose 0.5% year over year in July. The largest 12-month gains were in Ottawa (+4.8%) and London (+4.4%).

Among the five CMAs reporting declines, Toronto and Regina (-1.2% each) recorded the largest 12-month decreases.

StatsCanada

Dollar Rebounds in Anticipation of Q2 GDP Release

The US dollar is higher across the board against major pairs on Thursday. The first estimate of second quarter gross domestic product (GDP) in the US will be published on Friday, July 27 at 8:30 am EDT by the Bureau of Economic Analysis. The dollar gained ground on the euro after the European Central Bank (ECB) held interest rates unchanged as expected but said rates would be steady a year from now. The first release of GDP data for the second quarter is released 30 days after the end of the quarter with economists and analysts expecting it to be one of the best quarters in recent years. How good will the final number be has been the subject of commentary from President Trump and other members of his administration while some forecasters are lowering their estimates after a disappointing durable goods order data point.

  • US 2Q GDP forecasted at 4.1 percent
  • President Trump has told associates GDP is around 4.8 percent
  • Some forecasters have cut their estimates due to recent soft data

EUR Lower as ECB Plays it Safe

The EUR/USD lost 0.57 percent on Thursday. The single currency is trading at 1.1661 after the central bank kept rates and the quantitive easing program unchanged. The July meeting was almost a beat for beat replay of the June meeting, leaving investors with almost no new information. There was no clear guidance on the vague meting of summer of 2019 as the time horizon to lift rates.



The US GDP release will be the main market event of the week as it could come in above 4 percent. There is an open debate between economists on how much did the Trump tax cuts influenced the positive momentum. The U.S. Federal Reserve is scheduled to meet for two days next week. There are no expectations of a rate lift, but the data has so far validated the two rate hikes and more to come.

The meeting between Donald Trump and Jean-Claud Juncker was a win for the USD as it seemed Europe had conceded to American demands even if the goal is to reach zero tariffs. With trade tensions easing the market turned to monetary policy and growth divergence ahead of the Q2 GDP release on Friday morning.

The USD will face a serious challenges in August. Central banks are expected to close the monetary policy gap and retaliations from China on trade could end up hurting the American economy in the long term. Politics will also add some uncertainty to the US dollar as midterm elections approach with a forecasted Democratic win that change the power dynamics in Washington.

Brexit Fears Overpower BoE Rate Hike Expectation

The GBP/USD lost 0.59 percent on Thursday. The currency pair is trading at 1.3110 as the USD rebounded from yesterday’s losses. The Bank of England (BoE) is heavily anticipated to lift rates next week after the last monetary policy committee had three members who dissented from holding rates. Investors are pricing in a 81 probability of higher interest rates on Thursday but the divorce between the United Kingdom and Europe put more pressure on sterling.



The lack of an unified front within the Conservative party on which Brexit to pursue has left Prime Minister Theresa May with just eight months to figure out a lot of issues. The GBP has fallen as more uncertainty grips investors hopes of a comprehensive trade deal that keeps the UK as a participant of the single market.

Loonie Lower Despite NAFTA Optimism

The USD/CAD gained 0.20 percent in the last 24 hours. The currency pari is trading at 1.3072 ahead of the release of the second quarter GDP data in the US. The pair almost touched 1.32 at the at the beginning of the week, but a rebound from the loonie took the currency to near 1.3050. The optimism surrounding the NAFTA renegotiation was behind most of the move with the Canadian currency touching a six week high. The meeting between US President Trump and EU Commission chief Jean-Claude Juncker had a positive outcome although it was scarce on details and did not directly address the tariffs on steel and aluminum that will remain in place.



The change in leadership in Mexico gave the locked NAFTA negotiations a chance for a fresh start. The comments from advisors to elected-president Andres Manuel Lopez Abrador have been pro-NAFTA and the Trump administration came out in support of a quick resolution. It is unclear if the US is willing to drop the two more contentious issues it has pushed on the table, the sunset clause and the higher American percentage of US parts on autos. U.S. Trade Representative Robert Lighthizer has said that the negotiation is in its finishing stages, but so far the biggest issues remain up in the air.

Market events to watch this week:

Friday, July 27
8:30am USD Advance GDP q/q

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Canada: Retail trade, May 2018

Retail sales increased 2.0% in May to $50.8 billion, following a 0.9% decline in April. Sales rose in 8 of 11 subsectors, representing 70% of retail trade.

Higher sales at motor vehicle and parts dealers and at gasoline stations were the main contributors to the gain in May. Excluding these two subsectors, retail sales were up 0.9%.

After removing the effects of price changes, retail sales in volume terms increased 2.0%.

Sales rebound in several subsectors

Sales at motor vehicle and parts dealers (+3.7%) made almost a full rebound following a 3.8% decline in April, which had unseasonably cool temperatures and inclement weather in many parts of the country.

Receipts at gasoline stations (+4.3%) were up for the second month in a row, partially reflecting higher prices at the pump. Sales in volume terms at gasoline stations rose 2.7%.

General merchandise stores (+3.2%), building material and garden equipment and supplies dealers (+5.4%) and clothing and clothing accessories stores (+2.8%) also contributed to the gain. Increases in each of these subsectors more than offset the declines that had been reported in April.

Food and beverage stores (-2.1%) posted a sales decline for the fourth time in five months. The decrease in May was primarily due to lower sales at supermarkets and other grocery stores (-3.1%).

According to the Retail Commodity Survey, 20.6% of food sales took place at general merchandise stores in the first quarter of 2018 compared with 19.1% in 2017. During the same period, 75.1% of food sales came from the food and beverage stores subsector, down from 76.5% in 2017.

Higher sales in seven provinces, led by Ontario and Quebec

Seven provinces reported higher sales in May, with Ontario and Quebec more than offsetting their declines from April.

Sales in Ontario (+2.6%) increased for the fourth time in five months. Higher sales at motor vehicle and parts dealers accounted for the majority of the increase in May. Sales in the Toronto census metropolitan area (CMA) were up 1.4%.

In Quebec, sales increased 3.0%, following a 2.6% decline in April. Sales were up 1.4% in the Montréal CMA.

E-commerce sales by Canadian retailers

The figures in this section are based on unadjusted (that is, not seasonally adjusted) estimates.

On an unadjusted basis, retail e-commerce sales totalled $1.4 billion, representing 2.5% of total retail trade. On a year-over-year basis, retail e-commerce rose 16.9%, while total unadjusted sales increased 5.5%.

StatsCanada

Live FX Market Analysis – 10 July 2018 (Video)

In this week’s webinar, Senior Market Analyst Craig Erlam discussed the latest Brexit developments as two members of her team resign after an apparently united and productive meeting on Friday. He also talks Trump, after the latest imposition of trade tariffs and ahead of his trip to the UK and the NATO summit, and previews the week ahead.

Craig also gives his live analysis on EURUSD (12:20), GBPUSD (15:03), EURGBP (17:50), AUDUSD (19:35), USDCAD (24:12), GBPCAD (26:19), NZDUSD (28:31), USDJPY (30:22), GBPJPY (32:25) and EURJPY (34:52).

GBP/USD – British pound steady on modest GDP growth

USD/JPY – Japanese yen dips to 7-week low, inflation reports next

Commodities Weekly: Gold saved by dollar’s retracement