(OTTAWA) – July 17, 2008 – Concerns over the declining domestic and global economies have driven Canadian exporter confidence down to its lowest point on record, according to the semi-annual Trade Confidence Index (TCI) survey from Export Development Canada (EDC).
"Canadian exporters are clearly hurting right now thanks to a major slowdown in the U.S., a slowing global economy and a persistently high Canadian dollar," said Peter Hall, Vice-President of Economics and Chief Economist, EDC. "All of these challenges combined to take exporter confidence to the lowest point on record."
The overall index declined to 66.1 from 67.4 in January of 2008, the second consecutive lowest result on record since EDC began reporting semi-annually on trade confidence in 2000. The TCI survey examines the attitudes of Canadian exporters through five main TCI indicators: trade opportunities, export sales, domestic sales, and both domestic and global economic conditions.
The share of respondents indicating that the global economy would get worse soared steadily to 51 per cent from 30 per cent in the fall of 2007. At the same time, fewer exporters are counting on a strong domestic economy for relief. The percentage of respondents expecting domestic conditions to worsen swelled to 42 per cent, up from just 32 per cent 6 months ago.
Respondents generally believe that international sales have hit bottom. In this survey, just 15 per cent of exporters felt that international sales would worsen, down from 25 per cent in the fall, 2007 poll. Almost half believe that international sales will improve in the near term. In line with this, respondents are surprisingly upbeat about international trade opportunities. A sharp increase in pessimism in the fall 2007 survey was reversed in the spring, with 77 per cent of exporters expecting opportunities to improve or remain the same. This hint of optimism may suggest that Canadian exporters are diversifying into other markets. The share of exporters identifying the US as their top riskiest market rose dramatically in the last two surveys, to 25 per cent, second only to Asia.
Of the five TCI elements, export sales contain the greatest variation based on company size. Since the start of 2007, companies of all sizes are on a downward trajectory for their overall TCI scores but medium sized companies have the most pessimistic outlook. The extractive and transportation sectors stood out as the only group of respondents that demonstrated an increase in overall scores. The information communication technology (ICT) sector was by far the most optimistic about future export sales with 62 per cent of respondents believing that they will increase international sales.
Most exporters believe that the Canadian dollar will stop climbing. Those expecting a further increase shrunk to 24 per cent from 50 per cent a year ago. Sixty-two per cent expect the Canadian dollar to remain at current levels. The top coping strategy exporters identified was simply riding out the storm and absorbing the loss. Cost-cutting is also popular, but fewer exporters were resorting to this tactic compared to previous surveys. Those planning to pass on higher costs were in smaller company, as their ranks fell from 27 per cent to just 18 per cent of respondents. Slower global demand is likely increasing competitive pressure.
"The dollar's impact continues to hamper Canadian exports, but we're seeing more respondents simply acknowledge that a higher dollar is now part of the equation. And at the same time, exporters are backing away from strategies to cope with the eroding margins," continued Mr. Hall.
Regionally, Western Canada posted the most optimistic score of 68 despite declining from 74 since June of 2007, followed closely by Quebec at 67, Ontario at 65 and Atlantic Canada at 63. Opinion Search Inc. conducted the survey in April and May of 2008. A total of 1014 Canadian businesses participated, and the TCI was calculated on a total of 850 respondents. The survey results are considered accurate to +/- 3.1 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.html.
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 nearly 7,000 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining, is a recognized leader in financial reporting and economic analysis, and has been named one of Canada's Top 100 Employers for seven consecutive years.
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Media contact:
Phil Taylor
Public Affairs
Export Development Canada
(613) 598-2904
