Loonie slides amid falling wholesale sales, disappointing U.S. housing data

TORONTO - The Canadian dollar closed sharply lower Wednesday amid a drop in wholesale sales and another indication of how severe winter weather is impacting the U.S. economy.

The loonie moved down 1.08 cents to 90.24 cents US as Statistics Canada said wholesale sales fell 1.4 per cent to $49.6 billion in December, the lowest level in six months.

"The data contribute to our view that Canadian real GDP contracted in December after four solid months, in part afflicted by very severe weather (ice storm in Central Canada)," said CIBC World Markets senior economist Avery Shenfeld.

The machinery, equipment and supplies subsector recorded the largest decline in dollar terms in December, with a drop of 3.5 per cent. This decline was attributed to a 13.2 per cent decrease in the computer and communications equipment and supplies industry.

The motor vehicle and parts subsector was off four per cent in December, more than offsetting a gain recorded in November.

Other data showed that U.S. housing starts fell by 16 per cent to an annualized rate of 880,000, worse than the expected reading of 899,000.

Reports released Tuesday underscored how large amounts of snow and freezing temperatures are having an impact on U.S. economic performance. The Empire State Manufacturing Index for February, a gauge of manufacturing activity in the U.S. Northeast, declined much more than expected while the U.S. National Association of Home Builders' buyer traffic index fell sharply as fewer prospective buyers felt like braving severe winter conditions in many parts of the U.S.

Commodities were mixed with March crude on the New York Mercantile Exchange ahead 88 cents to US$103.31 a barrel.

March copper was unchanged at US$3.29 a pound while April gold bullion faded $4 to US$1,320.40 an ounce.