OTTAWA - 12 July 2006 - Confidence levels among Canadian exporters continue to decline amid growing evidence of a global economic moderation, a marked retreat from the boom years between 2002 and 2004 according to the semi-annual Trade Confidence Index (TCI) survey from Export Development Canada (EDC).
"As the economy decelerates from the best global conditions in 10 years, Canadian exporters are very clearly anticipating a much tougher time over the next 6 months," said Peter Hall, Vice-President and Deputy Chief Economist. "Exporters usually thrive when global economic performance is this solid, but Canada's strong dollar has created a significant challenge for exporters. Unlike previous episodes of dollar strength, exporters are standing up to the storm with aggressive counter-measures."
The TCI is a composite score based upon responses from Canadian exporters to five questions on future global and domestic sales, economic conditions and trade opportunities for the next six months. The EDC Spring 2006 Trade Confidence Index declined to 70.6 out of a possible 100 points, down from 71.7 in the fall of 2005 and 73.7 in the spring of 2005.
All five of the survey's components have seen the neutral responses shrink, although the survey captured a distinct rise in pessimism in the three components that dealt with exporting markets. The positive responses were related to the domestic outlook, both in terms of market and economy.
"What we're seeing is a strong rise in positive responses on the domestic outlook and negative responses in the exporting outlook, which has effectively shrunk the more stable neutral or middle ground," continued Mr. Hall. "This looks like a classic case of an economy where the prosperity of certain sectors has created secondary effects that are weighing heavily upon other sectors."
Among the notable findings, two-thirds of respondents stated that the value of the dollar is critical to their success in foreign markets, and the same proportion felt that the loonie would continue rising. Respondents repeatedly noted the impact of the Canadian dollar, but also provided insight into their strategic operational responses, such as cost cutting, altering business models and increasing prices. Elsewhere, those exporters believing that Asia is among the top riskiest markets decreased to 31 per cent from 41 per cent in the same period.
Overall, confidence about the economy was down across all business sectors. Among those sectors experiencing the least amount of decline in confidence were Energy, Information Technology and Mining, currently buoyed by high commodity prices and a recovering tech sector. Sectors experiencing the greatest decline in confidence were Consumer Goods, Agriculture and Foods, Forestry and Base and Semi Manufacturing, impacted by the high Canadian dollar, a drop in US housing starts and strong offshore competition.
Across Canada, only Western Canada maintained its confidence level, reflecting a heavier concentration of exporters in the booming energy sector. Exporters in Ontario, Quebec and the Maritimes continued their decline in confidence owing to their dependence on the manufacturing, forestry and agri-foods sectors.
Opinion Search Inc. conducted the survey in late May and early June of 2006. A total of 1,000 Canadian businesses participated, and the TCI was calculated on a total of 861 respondents. The survey results are considered accurate to +/- 3.4 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
Export Development Canada (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 7,000 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and is a recognized leader in financial reporting, economic analysis and human resource management.
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Media contact: Phil TaylorEDC Public Affairs (613) 598-2904 ptaylor@edc.ca
