Investors are digesting some modestly positive economic data that was released Friday. In Canada, wholesale sales rose, while consumer confidence in the U.S. jumped.

Wholesale sales edged up 0.2% in May with $35.9 billion in goods and services sold, ending three consecutive months of contraction, Statistics Canada reported.

The small gain was welcome after three straight months of lower sales. The gain was fairly broad-based, with increases reported in seven of 11 groups, led by stronger auto sales. There was weakness in techs and metals. RBC Financial notes that wholesale activity is up 6.1% compared to same period in 2002.

At the same time, wholesale inventories slipped 0.3%, and the inventory-to-sales ratio slid to 1.29 from 1.30. “On a trend basis, the ratio remains elevated relative to last year, but is still below the 1.40 level experienced in late 2000,” notes RBC. “This is a relatively positive report, especially when it is set against the relative weakness noted earlier this week in the manufacturing sector. Still, some wholesalers are having problems, notably in the motor vehicles and parts group who are continuing to do battle with their bloated inventories. Shedding of these stockpiles will likely exert some drag on growth in the months ahead.”

Also, the monthly survey of large retailers was released, revealing some gains. “This report, in tandem with stronger unit sales of autos during May, bodes relatively well for a decent monthly retail sales figure,” says RBC. “That Canadian consumers are continuing to spend is definitely what the Bank of Canada would like to see. As noted yesterday in its Monetary Policy Update, the Bank has emphasized that the growth outlook has become more dependent on domestic demand given the challenges posed to the external side of the economy stemming, in part, from a stronger-than-expected dollar. Still, to help the domestic side of the economy along the way, we think it would not be unlikely for the Bank to entertain further rates cuts ahead.”

In the U.S., it was reported that the Michigan Consumer Sentiment index rose to 90.3 for July, from 89.7 in June. RBC reports that the present conditions subcomponent jumped dramatically to 102.1 from 94.7, but weakness remains in the labour market and other confidence indicators. And, the expectations component slipped to 82.7 from 86.4.

“Although this report will not be much of a market mover, it does suggest that confidence in the economy remains intact. It also supports the likelihood of continuing gains in consumer spending in spite of a faltering job market. Along with other recent indicators that have been positive in their overall direction, this report suggests that the U.S. economy seems to be bracing for a meaningful recovery in the second half of the year,” it says.