Canadian Shipper

News

THE BOTTOM LINE: Exporter confidence still soft


EDC has just completed its twice-annual survey of attitudes of Canadian exporting companies. The Trade Confidence Index, or TCI, has edged up, but remains at a low level.

Each May and November, since 2000, EDC surveys 1,000 Canadian exporting companies, asking them a range of questions about their outlook for foreign and domestic sales, the dollar and so on. The November survey shows the TCI at 71.4 as compared to 70.7 six months earlier.

This slight rise sounds encouraging, especially given the view that was emerging last fall that the U.S. economy was slowing. A significant decline in the index would not have been surprising in that context. Nevertheless, one should not lose sight of the fact that exporter confidence remains soft, as the figure of 71.4 is well below the average level of the past five years, at 73.8.

Behind the weakness is an erosion in the outlook for global economic conditions. In the past four surveys, the share of companies expecting global conditions to worsen has increased steadily, from 18% to 24%, then to 26% and now to 28%, which is the highest since the fall of 2001, just after the events of 9-11. Yet 53% of companies surveyed still think they can increase their export sales, and 45% expect to increase domestic sales as well. Fully 40% intend to hire more people.

How do we account for the apparent resiliency of exporter attitudes? The main reason is the lower Canadian dollar. During the May 2006 survey, the dollar was fluctuating around U.S. 90-91 cents, and exporters (and most forecasters) were convinced that it was headed higher. Indeed, in May 2006, 63% of exporters surveyed believed the dollar would keep rising, and another 26% figured it would remain around 90-91 cents. This view proved to be wrong the dollar had declined to 87-88 cents by the time the November survey was taken, and only 23% now expect it to appreciate, 57% expect it to stabilize and 19% anticipate even further weakness in the dollar.

In addition, there is more evidence in the survey that companies are aggressively adjusting to the challenging business environment. Only 18% say that they are hoping to ride out the period of dollar strength, down from 27% in the last survey. A large number continue to say that they are working to reduce costs. But there has also been a jump in the number who are trying to adjust their export pricing and in the number who are reconsidering their fundamental business model.

Looking beneath the headline data, exporter confidence is relatively strong in the high-tech and telecommunications business, where the export outlook does appear to be improving. Confidence is lower for the mining and oil and gas sectors, which corresponds to the outlook for lower commodity prices in the wake of slower global economic growth. The most cautious respondents were in the forestry sector, where the U.S. slowdown is having the most immediate impact.

The bottom line? The latest survey of exporter confidence shows evidence of continued stress in the sector. But it also shows that companies are working hard to cope and with the modest slowdown we are expecting, and the lower dollar, there is reason for some cautious optimism.

Stephen Poloz is Senior Vice-President, Corporate Affairs and Chief Economist, Export Development Canada. His column on trade-related issues appears weekly on www.ctl.ca


Print this page

Related Posts



Have your say:

Your email address will not be published. Required fields are marked *

*