Canada and world pulled back into growth by recovering U.S. private sector: EDC forecast

OTTAWA, Oct. 30, 2012 /CNW/ - After considerable volatility in the last 4 years, EDC is predicting that Canadian exports of goods and services will rise 4.6 per cent in 2012 and an additional 6.3 per cent in 2013 in the wake of a structural, sustainable recovery in the U.S. private sector economy that will lead the world's next growth cycle.

"The bottom line is that while opposing economic forces are strong, the world economy's final growth push is on, led by the U.S. With Canada so close to the core of the action and well-positioned to participate, Canadian exporters should be readying themselves to run right now."

While many are focusing on the U.S. flirtation with the fiscal cliff, EDC is looking at the economic fundamentals of Canada's largest trading partner as a key factor in assessing Canada's trade performance through 2013. EDCs Fall 2012 Global Export Forecast sees the U.S. economy rising by 2.8 per cent in 2013, following 2.3 per cent growth this year.

"Consider the facts: Inflation-adjusted retail sales, a barometer for activity in 70 per cent of the U.S. economy, are now rising by 8 per cent. U.S. housing construction is currently up 35 per cent. For a leading indicator, that's doubly impressive," said Peter Hall, Chief Economist, EDC.

"U.S. corporations are sitting on $5.7 trillion of cash or near-cash that they are just about to start spending. Why now? Because as we speak, U.S. industrial capacity is within a hair of pre-recession limits. Parting with a mere fraction of this cash is sufficient to ignite an investment boom. Sum up the growth sources, and it looks like an economy on the move."

"Why is it not more obvious? Like any good rugby scrum, it's often hard to tell what's happening at ground level. Sighting the ball can be impossible, until one player grabs it and charges for the goal line. That player is the U.S. economy, and it's poised to make that dash at any moment."

Canada is poised to benefit. While Canada's domestic economy is softening, the U.S. revival, together with sustained forays into fast-growing emerging markets and a slightly softer loonie will lift Canadian GDP growth to 2 per cent this year and 2.2 per cent next. The Canadian dollar is forecast to dip from parity this year to 97 US cents in 2013 as commodity prices weaken over the same period.

"The timing is good for Canadian exporters. The rest of the economy will be looking to exporters for growth, as Canada bumps up against internal weakness. Consumers are overstretched, running up debts to historic heights during the recession years, government spending is in retreat, and unlike the U.S., Canada's housing markets are oversupplied."

EDC's forecast confirms that emerging markets will continue to boost global growth overall, but are experiencing slowdowns in important parts of their economies. Together, emerging markets will continue to outpace the developed world by a large margin, averaging 5.3 per cent in 2012 and 5.6 per cent in 2013.

Hall cautions, however, that "the dramatic growth of emerging markets is certainly lifting global average performance significantly, but at present, they are hardly pulling the rest of the world along. Among these economies, growth is static at best. India, China and Brazil are each battling significant slowdowns, highlighting their dependence on growth in the developed world and their own hefty stimulus programs, but to date have not matured enough to launch the next growth cycle."

EDC's semi-annual Global Export Forecast addresses the latest global export conditions including perspectives on interest rates, exchange rates as well as export strategies to help Canadian companies minimize risk. It also analyzes a range of risks for which exporters should be prepared. The forecast is available on EDC's website at : http://www.edc.ca/gef.

EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC's knowledge and partnerships are used by more than 7,700 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and a recognized leader in financial reporting and economic analysis.

SOURCE: Export Development Canada

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