Although Canada’s economic growth is forecast to outpace the US this year, just as it did last year, economists’ expectations have recently diminished. Still, the latest numbers from Canada’s wholesale sector showed surprising strength in May, which could mean second-quarter growth reaccelerated after a disappointing April (the national accounts for May will be released at the end of this month).

According to Statistics Canada (StatCan) wholesale trade numbers blew past projections in May, rising 2.2 percent, to CAD52.6 billion, which was an all-time high for the sector.

By contrast, economists had forecast an increase of just 0.6 percent. The prior month’s result was also revised higher by two-tenths of a percentage point, for growth of 1.4 percent.

The auto sector accounted for most of the gain, with sales of motor vehicles up 9.8 percent month over month, to CAD6.9 billion, or 13.2 percent of total wholesale trade. Motor vehicle sales have risen 9.0 percent year over year.

StatCan notes that this was the third gain in four months for the industry, and its largest monthly increase since November 2009. Motor vehicles also recorded strong growth in exports, imports and manufacturing sales.

Among the other sectors, we pay especially close attention to machinery and equipment, since this category indicates whether businesses are investing in future growth.

Sales of machinery, equipment and supplies rose 1.2 percent to CAD11.0 billion, on the strength of higher sales in three of the four industries in this category. StatCan observes that this was the second highest level on record for the subsector, just below the peak of CAD11.1 billion in November 2013.

On a year-over-year basis, machinery and equipment sales are up 3.9 percent, with most of the gain during this period coming from the construction, forestry, mining, and industrial machinery and equipment industry.

A buildup of inventories can also reflect wholesalers expectations about future demand. On this score, there’s also good news. Machinery and equipment inventories rose 0.5 percent month over month, to CAD19.3 billion, for the fifth increase in the past six months. On a year-over-year basis, that figure represents a gain of 7.8 percent.

Although retail numbers often command more attention from the media, wholesale trade is an important economic bellwether, and the sector has a strong correlation with overall economic performance.

In fact, according to data aggregated by StatCan, wholesale trade dwarfs retail trade on a revenue basis, even if the margins are slimmer.

Based on 2012 numbers, wholesalers generated total revenue of CAD865.3 billion, for operating profits of CAD36.9 billion, while retailers earned CAD485.8 billion in revenue that year, for operating profits of CAD24.4 billion.

Given these proportions, we’ll be monitoring wholesale trade just as closely as retail sales in the months ahead.

While these trends appear promising, for now we’ll have to defer to the actual economists, who have dialed back their projections for growth during the second half of the year.

In its latest quarterly report on monetary policy, the Bank of Canada (BoC) trimmed its forecasts for gross domestic product (GDP) growth for the third and fourth quarters, to 2.6 percent and 2.5 percent, respectively.

Even so, that’s slightly better than the consensus forecast among private-sector economists who expect the economy to grow by 2.4 percent in each quarter.

For full-year 2014, the consensus among institutional economists is that Canada’s economy will grow by 2.2 percent, while the BoC’s forecast is a tenth of a point better, at 2.3 percent.

Though these numbers are below the 2.5 percent threshold that the central bank has previously identified as the rate of growth necessary to remove excess capacity from Canada’s economy, they’re still at least half of a percentage point higher than the comparatively tepid forecast for US growth.

Portfolio Update

Conservative Portfolio holding TransForce Inc’s (TSX: TFI, OTC: TFIFF) revenue rose 12.2 percent year over year, to CAD889.1 million, during the second quarter, while adjusted earnings per share jumped 23.1 percent, to CAD0.48.

The transportation and logistics company’s sales exceeded analyst forecasts by 0.8 percent, for the first beat in nine quarters. And adjusted earnings per share came out ahead of projections by 16.2 percent, for the first upside surprise in four quarters.

EBIT (earnings before interest and taxation) climbed 27.6 percent from a year ago, to CAD79.5 million, with margins improving to 8.9 percent.

The CAD2.7 billion company also generated free cash flow of CAD97.4 million, partly as a result of the sale of excess assets. TransForce used this free cash flow to pursue acquisitions (CAD44.8 million), reimburse long-term debt (CAD35.7 million) and repurchase common shares (CAD4.0 million) during the quarter.

Management largely attributed second-quarter results to growth from acquisitions, though it also noted the company’s efforts to optimize asset utilization and operating efficiency helped boost its margins.

When excluding the contributions from the acquisitions of Vitran, Clarke Transport and Clarke Road Transport, revenue slightly declined.

TransForce also announced its agreement to acquire the Ontario-based trucking company Contrans Group Inc (TSX: CSS) for CAD495 million. Contrans is a major player in the Canadian trucking industry, with about 1,400 power units and 2,600 trailers under management.

While the mix of sentiment on Bay Street could change in the coming days as more analysts digest these numbers as well as the latest acquisition, TransForce currently enjoys a mostly bullish outlook, at eight “buys,” five “holds,” and no sells.

The stock has risen 8.1 percent since yesterday’s close, so analyst price targets have yet to catch up. Nevertheless, the consensus 12-month target price is CAD27.38, which is just 0.6 percent higher than the current share price.

TransForce is a buy below USD23.