Canadian exporters foresee improved outlook

By: | at 07:00 PM | Channel(s): International Trade  

By Leo Ryan, AJOT

Canada’s exporters are confident that sales will improve in the first semester of 2010, according to a recent survey by the Export Development Corporation (EDC). But the latest trade figures from Statistics Canada demonstrate that a sharp fall in exports in December drove Canada into its first monthly trade deficit since March, 1976.
“Canadian trade deficits may well now be a semi-permanent feature on the landscape, at least until the US economy pulls out of its deep dive,” remarked economist Douglas Porter with BMO Capital Markets.
“Simply put,” Porter added, “Canada’s trade position has feasted for decades on a backdrop of ravenous US demand. With that appetite now on the strictest diet imaginable, our trade outlook has withered accordingly.”
The United States accounts for about 75% of Canada’s total foreign trade.
Observers agree that the high value of the Canadian dollar, currently trading in the range of 95-96 US cents thanks in particular to firmer oil prices, has helped imports but poses an extra challenge for exporters.
Government officials, nevertheless, are counting on changes in the Canadian dollar in the downward direction later this year.
The overall Canadian trade deficit for December was C$458 million, compared with a trade surplus of C$1.2 billion in November. This was big shock to analysts who had been forecasting a surplus of close to C$500 million.
The Canadian exports in December fell by nearly 10% to C$35.2 billion, while imports dropped 5.7% to C$35.8 billion.
During the same month, Canada’s trade surplus with the United States retreated to C$3.8 billion from C$4.6 billion in November – the lowest level since December 1998. Canadian exports to the US in December plunged by 10% to C$25.9 billion, whereas imports from south of the 49th Parallel declined by 8.4%.
For his part, Peter Hall, EDC’s chief economist, declares that “trade is definitely in growth mode, but we can’t forecast the starting point.”
Commenting on the EDC’s semi-annual Trade Confidence Index (TCI), Hall recalled: “Canadian exports took a 20% 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 the chasm.”
The TCI moved to 77.4 this past fall from 68.5 in the spring of 2009.
The light manufacturing, infrastructure and environment sectors experienced the greatest increase in TCI. The transportation sector was also given a boost from economic stimulus programs. On the other hand, Canadian exporters in the commodity sector showed the least optimism.
According to the EDC, the fall survey showed a continued rebound in exporter perceptions about global economic conditions.
Nearly half of Canadian exporters now expect improving global economic conditions to translate into higher near-term international sales.
Canadian exporters expecting increased domestic sales in the coming months have risen to 46% of those surveyed – up from 30% in 2008.
In conclusion, Hall stated: Canada’s resilient economy has had a marked impact on the improvement of exporter confidence. Exporters who are able to see within Canada are clearly expecting to enhance overall performance by harnessing domestic strength.”

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American Journal of Transportation