OTTAWA - July 6, 2005 - Export Development Canada (EDC) released today the results of its Trade Confidence Index (TCI) survey, which suggests that Canada's exporters are faring remarkably well considering the strong Canadian dollar and volatility of the world economy.
"The rise in the Canadian dollar has hurt, but Canadian exporters have met the challenge head on," said Stephen Poloz, Senior Vice-President and Chief Economist. "Exports are decelerating following strong growth in 2004, but the TCI results suggest the potential to see volumes growing in excess of what was generally expected at the beginning of the year."
The EDC Spring 2005 Trade Confidence Index rose to 73.6 out of a possible 100 points, up from 70.6 in the fall of 2004. The TCI is a composite score based upon responses to five questions on future global and domestic sales, economic conditions and trade opportunities.
In its semi-annual update to its Global Export Forecast, EDC noted the resilience of recent export activity. In the past, a similar sharp increase in the currency would have caused an export crunch. However, Canadian companies are adapting, and are forecast to see exports increase by 4 per cent in 2005.
According to the results of the TCI, 79 per cent of Canadian exporters believe the value of the dollar will stabilize and potentially decrease over the next six months compared to 50 per cent in the fall of 2004. Respondents also consider that the strength of the Canadian dollar is the greatest challenge for exporters, yet overall their trade confidence is rising. The share of Canadian exporters who believed that exports will increase in the next six months increased to 48 per cent from 40 per cent, while their confidence in domestic sales remains solid.
"Certain key factors help to explain how Canadian exporters have defied the predictions of conventional economic models," continued Mr. Poloz. "First, global growth has slowed from the 2004 pace, but not by as much as had broadly been expected. Second, prices for commodities that Canadian firms export have outpaced increases in the dollar, preserving profit margins for primary producers. Third, manufacturers have been partially shielded from dollar movements by globalizing their supply chains."
One in four respondent companies use foreign direct investment as an export strategy, indicating that they have or plan to have operations outside of Canada, up slightly since the fall of 2004, and up from 19 per cent at the same time last year. The principal forms of direct investment are the expansion of existing facilities (24 per cent), joint ventures (23 per cent) and new direct investment (23 per cent).
Consistent with these findings, the TCI survey found that approximately 22 per cent of exporters saw global economic conditions improving, a rise from 19 per cent in the fall of 2004. At the same time, confidence in the domestic economy remains strong, with 80per cent of survey respondents expecting similar or improved economic conditions within Canada.Hiring intentions are also a measure of trade confidence. Approximately 38 per cent of respondents indicated that they planned to increase hiring, an increase of 5 per cent over the fall 2004 period and the highest since the fall of 2002. IT, energy and industrial equipment were the top sectors planning to increase hiring over the next six months.
Canadian companies continue to focus upon developed markets, particularly the US, while China, Mexico and India are cited as export growth opportunities. Asia, while perceived to be the top region for growth opportunity, was cited by a larger share (39 per cent) of exporters as the zone with the greatest degree of risk, up 13 per cent from the same period last year.
Opinion Search Inc. conducted the survey in May and June of 2005. A total of 1,000 Canadian businesses participated, and the TCI was calculated on a total of 797 respondents. The survey results are considered accurate to +/- 3.43 per cent, 19 times out of 20.
EDC is a Crown corporation that provides trade finance and risk management services to more than 6,900 Canadian exporters and investors. In 2004, EDC supported $54.9 billion in export sales or investments in some 175 markets worldwide. EDC is a recognized leader in providing essential commercial financial solutions to Canadian companies of all sizes, and their customers, helping them succeed in the global marketplace.
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Media contact:
Phil TaylorEDC Public Affairs (613) 598-2904 ptaylor@edc.ca
