(OTTAWA) July 12, 2007 Confidence levels among Canadian exporters edged higher in the past six months despite a slowing global economy, according to the semi-annual Trade Confidence Index (TCI) survey from Export Development Canada (EDC). The overall index rose to 72.9 out of a possible 100, up from 71.4 in the fall of 2006 and its highest point since the spring of 2005.
“The overall number has moved higher, but not all sectors are participating in the renewed optimism,” said Peter Hall, Vice-President and Deputy Chief Economist. “The more upbeat outlook is being driven mainly by the ICT, energy, metals and transportation sectors, which also explains the rise in export confidence in Ontario and Quebec where some of these industries are concentrated.”
The TCI survey demonstrates that Canadian exporters continue to be cautiously optimistic about domestic economic conditions and sales. However, respondents did believe that global economic conditions will improve over the next 6 months but were a little more downbeat about their own export sales opportunities. This seemingly incongruous trend points to greater disparity in the outlook across all sectors given that both optimistic and pessimistic responses grew while neutral responses shrunk.
Once again, the TCI survey captured a significant opinion swing on Canadian exporters’ outlook on the value of the Canadian dollar against the U.S. dollar. The number of respondents that believe the Canadian dollar will increase over the next six months more than doubled since the fall of 2006, as it nearly did in the spring of 2006 (63 per cent) compared to the fall of 2005 (34 per cent), suggesting that Canadian exporters find forecasting the movements of the Canadian dollar challenging.
Not surprising, the percentage of respondents highlighting the importance of the Canadian dollar in their ability to compete remains high, but the share has been edging down in the past three TCI surveys. When asked about their response to the current level of the Canadian dollar, the spring 2007 survey shows more companies have adopted currency hedging, raised export prices, increased foreign sourcing, and continued to focus on reducing costs.
“Given the rise of the Canadian dollar, we should be seeing a corresponding rise in respondents’ concern about the impact of the dollar on their competitiveness,“ continued Mr. Hall. “ While the concern remains high, the slight tapering off of it’s importance strongly suggests that exporters have developed and implemented strategies to alleviate the impact of a rising dollar.“
Compared with last fall, the improvement in this spring’s exporter confidence was seen across several key sectors energy, metals, ICT and transportation. Confidence among forestry companies deteriorated while light manufacturing saw no change. Prospects for export sales also showed mixed results across the various industries. Since last fall, companies in the extractive (oil and gas, petrochemicals, fertilizers, mining/metals) expect to see a significant increase in their export sales. Similarly, information and communication technology companies are much more upbeat regarding export sales.
The transportation sector reported a small increase in the outlook for export sales, most likely due to continuing strong sales for aerospace suppliers and rail equipment. Export expectations across most other sectors remain relatively flat compared with the fall 2006 survey. The major exception is light manufacturing, which reported a noticeable drop in expectations for export sales between the fall 2006 and spring 2007 surveys. Light manufacturing includes products such as consumer goods, furniture, textiles and clothing all areas where export sales have been under severe pressure from the stronger Canadian dollar, weaker US growth and rising international competition.
Regionally, Atlantic Canada posted its highest index score ever (74), tying Western Canada, which remained high but flat, for the highest confidence level in Canada. In a surprising move, confidence levels rose in Ontario (an increase of 2 percentage points) and Quebec (an increase of 3 percentage points).
The TCI is a composite score based upon responses from Canadian exporters to 5 questions that measure increases or decreases in optimism on future global and domestic sales, economic conditions and trade opportunities for the next 6 months.
Opinion Search Inc. conducted the survey in May and June 2007. A total of 1,012 Canadian businesses participated, and the TCI was calculated on a total of 878 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.
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 has been named one of Canada’s Top 100 Employers for six consecutive years.
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Media contact: Phil Taylor Public Affairs Export Development Canada (613) 598-2904 ptaylor@edc.ca
