CANADA DATA: Sales Figures Point To Softer Activity In August, Led By Autos

Canadian manufacturing and wholesale sales (Ex-petroleum, products, other hydrocarbons, oilseed & grains) came in slightly better than expected in September, at -1.0%  / -1.2% M/M respectively. This compares to the advance estimates of -1.5% for manufacturing (prior rev to 2.2% from 2.5%) and -1.3% for wholesale sales (1.7% prior rev from 1.2%) and despite is suggestive of a drag on August GDP from wholesale and manufacturing output (the August GDP advance estimate is for flat growth M/M overall).

• From a momentum perspective both sales categories appear to be past the worst - but the auto industry appears to remain under duress, with the trade conflict with the US continuing to pose headwinds.
• Looking first at manufacturing sales, the decline nonetheless pared the contraction in the 3M/3M annualized pace to -1.3%, which was a 5th consecutive drop but far better than the -17.6% posted in June that helped drag on Q2 GDP. In volume terms, higher prices meant that the picture was less positive: they fell 1.5% in August, worst in 4 months and erasing the 1.3% rise prior. They're contracting at a 3.4% quarterly pace, with the level of shipments at the lowest since September 2021. Year-to-date through the first 8 months of the year, sales are down 1.0% Y/Y.
• Manufacturing inventories ticked up 0.3% to the highest since November 2023, with the inventories-to-sales ratio remaining relatively steady over the last 4 months at a relatively high 1.75x. StatCan noted lower sales in 12 of 21 subsectors, with the biggest drops coming in the transportation equipment (-5.7%, with motor vehicle parts falling 5.2% and vehicles 3.3% amid "lower than typical seasonal sales of motor vehicle parts as well as production slowdown at a major auto assembly plant in Ontario") and food (-1.9%) subsectors, while primary metal sales increased the most (+3.6%).
• And as for the wholesale data, sales fell in 3 of 7 subsectors, led by motor vehicle parts/accessories (-8.8%). Ex-petroleum, products, other hydrocarbons, oilseed & grains sales rose for the 3rd consecutive month (1.3%) and is rising at a solid 3.9% 3M/3M pace which is a post-April best. In volume terms, gains were firmly negative in the month however (-2.7% M/M), the first drop in 3 months, though the 3M/3M ann rate was still elevated at 6.8%. Overall wholesale sales jumped 7.4% on a 3M/3M annualized basis, which would be the fastest since February, though again that's in nominal terms.
• Inventories-to-sales for ex-petroleum etc picked up to 1.58x from 1.55x prior, which excluding the first 2 months of the pandemic was the highest since at least 2000 - suggesting a building overhand that could depress future activity.