Confident exporters: It's All Up From Here
OTTAWA, Jan. 12 /CNW Telbec/ - Canadian exporters are confident that sales will improve over the next six months, according to Export Development Canada's (EDC) semi-annual Trade Confidence Index (TCI).
"The improvement in the TCI is in line with recent trade performance, and reflects a strong sense that international sales are set to improve in the coming months," said Peter Hall, EDC's Chief Economist. "Trade is definitely in growth mode, but we can't forget the starting point. Canadian exports took a 20 per cent hit in 2009, six times greater than any annual decline in recent memory. What exporters are saying is that they expect to start climbing out of that chasm."
EDC's TCI moved to 77.4 in the fall 2009 from 68.5 in the spring 2009. The survey results followed a similar 7.5-point jump in the spring of 2009. This is the TCI's largest rebound in the post-9/11 period, and is in keeping with movements in other business outlook surveys over this period. The TCI is now above its historical average level.
The fall survey showed a continued rebound in exporter perceptions about global economic conditions. Nearly half of Canadian exporters now expect global conditions to improve, up dramatically from just 11 per cent one year ago. This is expected to translate into higher near-term international sales.
After tumbling in three of the last four surveys, the share of exporters expecting international sales to increase in the next six months rose 11 percentage points to 48 per cent of respondents. Exporters also sense that their international trade opportunities have improved in the past six months.
Faced with sharply lower international sales over the past year, exporters have capitalized on relatively strong sales inside Canada. A sharply higher share of those surveyed believes domestic economic conditions to improve. Sales into the domestic market are likewise expected to rise. Exporters expecting increased domestic sales in the coming months rose to 46 per cent of those surveyed, up from 30 per cent last fall.
"Canada's resilient domestic economy has had a marked impact on the improvement in exporter confidence. Exporters who are able to sell within Canada are clearly expecting to enhance overall performance by harnessing domestic strength," said Mr. Hall.
For more information about EDC and the Trade Confidence Index, visit www.edc.ca/english/docs/ereports/tradeconfidence/country_information_index_e.htm.
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 8,300 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining, a recognized leader in financial reporting and economic analysis, and has been recognized as one of Canada's Top 100 Employers for nine consecutive years.
BACKGROUNDER
EDC TRADE CONFIDENCE INDEX SURVEY RESULTS
FALL 2009
Following two years of decline, Canadian exports finally pulled ahead in the third quarter by 3.6 per cent. The about-face in performance no doubt contributed to the more positive outlook compared to the spring. According to Peter Hall, EDC's Chief Economist, although the EDC survey has no questions on the topic, fiscal stimulus likely had a positive influence on exporters' expectations. Stimulus packages in export destination countries are bolstering Canadian sales abroad, and the effects are obvious in recent trade data.
Exporters' optimism is evident across all sectors, to varying degrees:
- The information, communications and technology sector is the most
optimistic, consistent with its historical trend.
- The light manufacturing and infrastructure & environment sectors
experienced the greatest increase in TCI scores from the spring
(moving from 67.1 to 77.5 and 69.1 to 78.5, respectively).
- The transportation sector is also getting a boost from stimulus
programs, with the cash-for-clunkers program wrapping up a successful
campaign to increase consumer demand. Much of the third quarter
increase in automotive exports was attributed to these programs, and
despite their conclusion, the results likely spurred greater trade
confidence for exporters for the next six months.
- Canadian exporters in the resource and extractive sectors are
experiencing the least optimism. The resource sector experienced the
smallest increase in trade confidence from the previous reporting
period. Weaker global demand conditions together with dramatic
year-on-year price declines are likely key factors in the poorer
results for commodity-based industries.
The near-term positive outlook for the light manufacturing sector is likely buoyed by public policy measures aimed at boosting consumer demand, while exporters in the infrastructure and environment sector will continue to benefit from various public stimulus packages around the globe with large infrastructure components to address the global downturn.
An important component of the TCI is the surveying of exporter perceptions about the movement of the Canadian dollar. Of the survey respondents, 85 per cent feel that it will either increase or remain at the same level in the near term, despite the dollar's current high value. The Canadian dollar fluctuated between US$.93 and US$.95 during the survey period.
In theory, a high dollar tends to weigh on confidence, yet respondents were upbeat in spite of the dollar's strength. But instead of just riding it out, more exporters are adopting currency strategies. For example, those undertaking hedging rose to 19 per cent from 15 per cent of the sample between last spring and fall. Firms are also reconsidering decisions to increase foreign sourcing of inputs, and are altering their production systems to accommodate dollar movements.
Recent import growth seems to agree. The latest Statistics Canada release shows that imports grew by eight per cent in the third quarter, twice as much as exports. These imports may be helping to reduce businesses' overall costs by allowing them to acquire cheaper inputs or improve productivity by purchasing more efficient machinery and equipment.
Other notable survey results:
- The United States remains the preferred export market despite
depressed demand. However, there was also a shift in perceived risks
of doing business in the U.S., where risk perception fell to 21 per
cent in this survey period from a high of 31 per cent in the fall of
2008 and then 28 per cent in the spring of 2009.
- As for the favored places to invest, 64 per cent of respondents
preferred the United States. This preference has diminished slightly
since the spring, as respondents search for investment opportunities
in other countries.
- The survey results showed that the global recession continued to chip
away at Canadian foreign investment activity. The percentage of
respondents who are making, or plan to make, investments abroad has
declined over the past three TCI reporting periods. This survey
period experienced the biggest drop, falling from 20 per cent to
14 per cent between the spring and fall of 2009.
This decline appears at odds with the latest results from Statistics Canada, which shows that Canadian investment abroad increased in the third quarter of 2009. However, given the uncertain economic environment and tight credit conditions, TCI respondents may be suspending their foreign-investment activities for the time being.
Opinion Search Inc. conducted the survey in late October and early November of 2009. A total of 1000 Canadian businesses participated, and the TCI was calculated on a total of 823 respondents. The survey results are considered accurate to +/- 3.1 per cent, 19 times out of 20.
For more information about EDC and the Trade Confidence Index, visit www.edc.ca/english/docs/ereports/tradeconfidence/country_information_index_e.htm.
For further information: Media contacts: Phil Taylor, Export Development Canada, Tel: (613) 598-2904, Blackberry: [email protected]
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