(OTTAWA) – January 15, 2009 – International and domestic economic conditions continue to weigh on the confidence of Canadian exporters, which fell by a record 5 percentage points to a third consecutive all-time low over the past 18 months, according to the semi-annual Trade Confidence Index (TCI) survey from Export Development Canada (EDC).
‘The world economy is collapsing around Canadian exporters. Growth has come to an abrupt halt in the world’s largest economies, and financial market turbulence is not helping matters,’ said Peter Hall, Vice-President of Economics and Chief Economist, EDC. ‘Amidst this economic backdrop, the shock of last fall’s seismic financial and economic shifts has turned into abject pessimism about the near-term future.’
The overall index tumbled to 61.0 from 66.1 in the past 6 months, the lowest result on record since EDC began reporting semi-annually on trade confidence in 2000. The survey examines the attitudes of Canadian exporters through five index elements: trade opportunities, export sales, domestic sales, and both domestic and global economic conditions. All five elements contributed to the recent drop in the Index.
The share of respondents indicating that the global economy would get worse surged to 64 per cent from 51 per cent in the spring of 2008, and 30 per cent in the fall of 2007. At the same time, concerns about the domestic economy hit a new high, with 57 per cent of respondents expecting domestic conditions to worsen, a 15 per cent leap in just 6 months.
When it comes to trade opportunities, Canadian exporters are more polarized than ever before. While respondents who believed that international trade opportunities will worsen grew from 23 per cent to 38 per cent, compared to 6 months ago, the number of respondents who believed they would improve also grew to 33 per cent from 28 per cent in the same period. These results may suggest that the growing number of Canadian exporters that have expanded into non-traditional markets in the past two years think that those opportunities will help to shore up near-term activity.
The percentage of exporters expecting their international sales to remain the same or worsen jumped to 62 per cent in the fall, the highest level ever. And in a departure from the norm, the share of exporters identifying the U.S. as their top riskiest market rose dramatically in the last three surveys, reaching 33 per cent in the fall of 2008 (compared to 25 per cent in the spring). Interestingly, this survey saw the US overtake Asia as the perceived riskiest market for the first time.
The resources sector has been hit hard by the U.S. housing market slump and plunging commodity prices. Confidence was already low in this sector because of the protracted decline in U.S. residential and commercial construction, one reason that the sector registered the smallest period-to-period decline among all industry groupings.
The transportation, information and communications technology (ICT) and extractive sectors experienced the largest drops in exporter confidence from the spring survey. Factors contributing to waning confidence include a 16-year low in auto sales, declining oil and metals prices and a drop in corporate investment.
Forty per cent of exporters believe that the dollar will increase over the next 6 months. A majority of Canadian exporters report that the value of the Canadian dollar is a key factor when competing in, or considering entry into, foreign markets. Fortunately for exporters, the Canadian dollar has more recently returned to the mid-80 cent level from its extraordinary highs only 6 months ago.
Hiring intentions, another indictor of trade confidence, also reached an all-time low. Less than one-quarter of Canadian exporters plan to hire over the next six months. On a positive note, the majority of exporters plan to maintain their current level of employment, which could mean no major lay-offs are anticipated in the near-term.
Regionally, Western Canada posted the most optimistic score of 63 despite declining from 68 since the spring of 2008, again followed closely by Quebec at 62 (down from 67), Ontario at 60 (down from 65) and Atlantic Canada at 58 (down from 63).
Opinion Search Inc. conducted the survey in April and May of 2008. A total of 1002 Canadian businesses participated, and the TCI was calculated on a total of 854 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.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, is a recognized leader in financial reporting and economic analysis, and has been named one of Canada’s Top 100 Employers for eight consecutive years.
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Media contact:
Phil Taylor
Export Development Canada
Tel: (613) 598-2904
Blackberry: ptaylor@edc.ca
