Canada’s current account surplus declined by $1.2 billion to $6.7 billion in the fourth quarter as funds flowed out of the country for the third consecutive quarter, Statistics Canada reported Thursday.

In separate releases, StatsCan said retail sales dropped 1.2% in December to $26 billion, the lowest level in a year, but December wholesale sales reached their highest level ever, slightly exceeding the peak reached in January 2003.

StatsCan said the decline in the current account surplus resulted from a lower surplus on trade in goods and a larger deficit on investment flows.

For all of 2002, the current account surplus was $25.8 billion, as Canada’s surplus on trade in goods rose by $2.4 billion to $60.2 billion with exports declining 3% and imports declining 4%.

The fourth-quarter surplus on trade in goods was $15.1 billion, down $600 million from the third quarter. Exports declined by $400 million to $98.2 billion, the lowest level in four years, the agency said. Imports increased by $200 million.

The December retail sales numbers were pulled down by the vehicle sector and by general merchandise and clothing stores. The overall decline of 1.2% reflected declines in all provinces, as auto sales dropped 4.4%, continuing a slump that began in August.

December’s Christmas shopping fell 2.6% in general merchandise stores, their steepest monthly sales decline since September 2001.

For all of 2003, Statistics Canada tallied $316 billion in retail sales of goods and services. That was up 3.1% from 2002 – barely half the 6% sales growth in 2002 and the smallest annual gain since 1995.

Excluding vehicles, sales slipped 0.1% in December and advanced 4.4% for the full year.

While retail sales slumped, the automotive sector boosted wholesale sales in December by 0.8% to $36.9 billion. Excluding motor vehicles, wholesale sales advanced only 0.2%.

“The downbeat tone of retail activity comes as somewhat of a surprise, given reports that holiday sales were solid,” says BMO Nesbitt Burns. “The details of the report do little to offset the impact of the headline number. General merchandise was off 2.6% and clothing sales were down 1.6%, with both men’s and women’s clothing stores off sharply. Despite all the gloom, there were a few pieces of good news in the report. Furniture sales remain robust, owing to the ongoing strength in the housing market, and there were some slight upward revisions to November’s numbers.”

Although the month’s total wholesale activity was the highest ever, wholesale sales registered nearly zero monthly growth since February.

Statistics Canada noted that the inventory-to-sales ratio remained at historic lows, with inventories in December amounting to 1.25 times sales. This was attributed to tighter inventory control.

Wholesale sales rose 3.6% for all of 2003, compared with 6.2% in 2002, with the automotive sector causing the slowdown.

Its wholesale sales declined 3% for the year, compared with a 15.1% increase the previous year.

Excluding the auto sector, wholesale sales grew 5.2% in 2003, outpacing the 4.2% growth in 2002, as all other sectors increased their annual sales.