November 2, 2004 TORONTO -- Ontario export sales are forecast to increase by a more modest 2 per cent in 2005, after growing by 8 per cent this year, according to a provincial export outlook from Export Development Canada (EDC). "The gains in Ontario during the next 12-18 months will be broad based across all major sectors," says EDC senior vice-president and chief economist Stephen Poloz. "But commodity producing sectors such forestry and industrial goods will witness the strongest demand." The automotive sector, which accounts for almost half of Ontario exports, is projected to build on the 3 per cent rise in sales this year with a more modest increase of 1 per cent growth in 2005. Trucks-specialty and medium to heavy duty-and auto part exports will drive the sector's performance this year and next. The cyclical upturn, as well as an increase in the North American and global assembly capacity are behind the strong sales of both trucks and auto parts. The export picture is much the same for the industrial goods industry. Exports are projected to grow by 3 per cent next year after rising an estimated 20 per cent in 2004. Sales of metals, ores, rubber, plastics, intermediate inputs, and chemicals will likely follow the same trajectory as world economic growth in 2004-2005. They are likely to increase this year because of strong demand for manufacturing inputs and rising commodity prices, and then soften next year as the economy begins to ease back to a more sustainable pace, reducing global factory output and trimming back commodity prices. The machinery and equipment (M&E) sector will benefit from a recovery during the next two years that should boost exports by 5% and 4% in 2004 and 2005, respectively. Strengthening demand for IT products, which account for over 40 per cent of Ontario's M&E sales, will lead the upturn this year and next. The two remaining bright spots in Ontario's overall export picture are the forestry and agri-food industries. Forestry exports are forecast to rise by 7 per cent in 2005, building on the strong 13 per cent growth this year. While agri-food exports are anticipated to rise by 6 per cent in 2004 and in 2005. The forestry industry is forecast to be one of the leading sectors in the province during the next 12-18 months. Strong residential construction in the U.S. and pulp demand from Asia are fuelling demand this year, but rising mortgage rates and softening demand for new homes next year will likely curb foreign sales of lumber and gear down export growth to a more modest level. Agri-food exports, such as prepared food and beverages which make up about 60 per cent of the province's agri-food sales, are expected to benefit from the strength of the global economy and ensuing robust employment conditions in the U.S. However, the American ban on Canadian live cattle and beef imports will continue to suppress the overall export growth forecast. Ontario merchandise export sales were $165.5 billion in 2003, and will rebound by about 8 per cent to approximately $178.4 billion in 2004. Growth should moderate in 2005 with exports reaching about $182.6 billion. The exports from the province represent approximately 48 per cent of total export volume in Canada. Nationally, the economy is expected to grow by 3.2 per cent in 2005, roughly on par with 2004, and export sales should increase by 1 per cent in 2005, after rising by 9 per cent this year. A copy of EDC's Global Export Forecast is available on EDC's web site: http://www.edc.ca/docs/ereports/gef/EFindex_e.htm EDC provides trade finance and risk management services to Canadian exporters and investors in up to 200 markets. Founded in 1944, EDC is a Crown corporation that operates on commercial principles. - 30 - Media Contact: Glen Nichols Public Affairs Tel.: (613) 598-2876 E-mail: glnichols@edc.ca
