Canada’s composite leading index rose by 0.3% in August after a 0.1% increase in July, fueled by continued growth in household demand and improvements in manufacturing, Statistics Canada reported today.

The composite index has risen in four of the last five months; it remained unchanged in June.

Sales of furniture and appliances grew by 0.4%, while the housing index suffered a 2% decline.

Sales of other durable goods were an exception to the strength in household spending, slipping 0.3% from July. This reflects soaring gasoline prices that slowed auto sales over the summer.

Manufacturing continued to recover from a weak start to the year. New orders expanded by 1%, the third increase in four months, led by aerospace and capital goods.

The U.S. leading indicator rose by 0.1%, its first increase since the financial crisis began in August 2007.

Meanwhile, July wholesale figures out today showed growth at the fastest pace in 17 months. Wholesale sales rose 2.3% in July to $46.2 billion, a fifth consecutive monthly gain. Price effects were minimal, as sales in volume terms rose 2.2%.

This was higher than expected among some economists, including RBC fixed income strategist Mark Chandler who expected the sales to moderate to 0.8% month-over-month growth.

Year-over-year, total wholesale sales are up 5.8%.

Food, beverages and tobacco products was the only sector reporting lower sales, down 2.6% from June.

The largest contribution came from the “other products” sector, which rebounded from a 3.4% drop in June to post a 6% increase in July. Sales in this sector have increased significantly over the past year, due to higher global demand for agricultural supplies. Exports of fertilizers and fertilizer material rose by more than 30% in July and have more than doubled over the past year.

The building materials sector also grew a significant 4.8%. Wholesalers of metal products registered the largest increase, up 10.8% in July after a 7.9% rise in June. The value of metal products sales has risen sharply since the end of 2007, mostly due to higher world prices.

The machinery and electronic equipment sector posted a 3.1% increase for its seventh consecutive rise. This was helped by higher sales in the machinery and equipment trade group.

Overall, six provinces reported higher sales in July.

Saskatchewan registered another double-digit rise, at 10.4%, its third of the year, thanks to higher international demand for agricultural products such as fertilizers.

Ontario registered its sixth increase of the year at 2.6%. The province’s sales in the first seven months of the year, however, were slightly lower than in the same period in 2007.

Inventories rose 1.2% in July, a fifth consecutive monthly gain, with the motor vehicle and “other products” groups accounting for roughly half of the rise.

With the sales growth outpacing the rise in inventories, the inventory-to-sales ratio continued the gradual decline observed over the previous four months, decreasing from 1.23 in June to 1.22 in July. The ratio now sits at its lowest level since January 2006.

IE