Innovation investment could spur on exports in 2017

Export Development Canada (EDC) has released its latest Trade Confidence Index (TCI).  What does it say about how confident Canadian business is about the world outside our borders?  What world issues are on the minds of Canadian business when they are looking to export?  

“Canada is an exporting nation and the USA represents 80% of our export market,” says Rhonda Barnet, VP of Finance for Steelworks Design in Peterborough and Chair of the Board, Canadian Manufacturers & Exporters (CME).  “Given the current US political uncertainty, many manufacturers have put off or delayed major investment decisions across North America to see what actions are realized by President Elect Trump that could impede our integrated supply chains.  Some industry pillars like automotive have experienced significant growth while others like Oil and Gas have struggled.  The offset in Canada has been neutral to slightly negative growth for our sector.  There is still great opportunity for growth in our sector.  We need to focus our government and our factories on innovation and productivity.”

EDC has been conducting the TCI twice a year since 1999.  The Crown Corporation calls it “a pulse check of Canadian exporters’ level of confidence and their projections for international trade opportunities".
The score is based on five elements: 

• Export sales
• International business
• opportunities
• World economic conditions
• Domestic sales
• Domestic economic conditions

Overall trade confidence dropped in 2016, according to EDC, from a score of 75.1 in the spring to 72.3 in the fall.  It’s the lowest level of trade confidence since the fall of 2012.  However, the report goes on to say that the vast majority of respondents anticipate conditions to remain the same or improve across all five of the TCI elements, with the greatest optimism for export sales.

The low Canadian dollar was cited by some respondents as the reason for improvement in international business opportunities, while others cited world instability and concerns about oil and gas production as the reasons why such opportunities would worsen.  

Optimism and hope for the world’s emerging economies was given as the top reason by those anticipating a positive outlook to world economic conditions.  Among those with a negative outlook on world economic conditions concerns about world recession or global instability were mentioned along with the conflict in the Middle East.  

On the index element of domestic sales, those with a positive view cited acquisition of new customers or contracts as the main reason, while those with a bleaker outlook mentioned seasonal activity or demand as the driving factor for that expectation. 

Expectations for domestic economic conditions slipped from spring of 2016 to fall of 2016, however those who felt an upturn was at hand and those who felt a more negative outlook was more realistic cited very similar reasons: the oil and gas industry, political change and government initiatives and the value of the Canadian dollar.  

When the numbers are displayed by business size, small, medium, and large enterprises all expected exporting conditions to worsen.  

When asked what the major issues were impacting international markets and trade activity, the majority of respondents ranked the outcome of the US election as their top priority followed by the slowdown of growth in China and then the Brexit vote.  

Close to half of the respondents to the survey reported having plans to export to new countries in the next two years, with China, Germany and the UK listed as potential market destinations.  

Only 32% of respondents indicated they would be hiring over the next six months. 74% said accessing skilled labour is moderately or very difficult.  This is up 2% from the spring survey.  

Of those surveyed 15% made investments outside of Canada, mainly in the form of foreign sales or branch offices, warehouses, and plants.  The main reason for investing outside of Canada was to increase market penetration.  

The US continues to rank as the most common destination for current exporters and foreign investment. The low Canadian dollar continues to have positive impacts on the export sales of survey respondents.  
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The survey was conducted by telephone in September and October of 2016.  Read EDC Reports

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