There’s nothing like a little growth to pick up the spirits. Many indicators are pointing north again, and sentiment is noticeably brighter – in part, out of relief that the worst is behind us, but also reflecting a broadly-based rebirth of hope. Following a tough 2009, Canada will see the return of growth this year.
For Canadian exporters, calling 2009 a tough year is a gross understatement. The collapse of global trade and the resulting plunge in commodity prices lopped a shocking 24% from total exports. Not only was 2009 the worst year on recent record, but the decline was a stunning six times deeper than the weakest year going back to 1961. Worse still, exports began 2009 on the heels of a 5% drop in price-adjusted trade in 2008 – the trade sector was already in recession before last year’s carnage. There is some solace in the fact than on balance, Canada fared no worse than the rest of the world.
EDC’s Winter 2010 Global Export Forecast predicts that the world will begin to rise out of the chasm of recession this year. Following a deep 1.2% pan-global decline last year, GDP is expected to rise by 3.2% in 2010. Developed economies will together post 1.8% growth, while emerging markets rise by a collective 4.8%. Canada is expected to outpace average growth for the industrialized world for the second year in a row, with an economy-wide increase of 2.1%. Growth in international exports will outpace GDP growth marginally at 3%, and if price increases are included, by 5% overall.
Industries that were hardest hit in 2009 will generally see the largest export gains this year. Energy exports are forecast to rise by 11% in 2010, on the heels of a 42% drop last year. The auto sector will also be in double-digit territory, rising 10% following successive 22% and 28% drubbings in the last two years, respectively. Ores and metals melted down by 31% last year, but higher demand and decent price gains will push shipments up by 10% in 2010. Sectors showing decent single-digit gains include chemicals and plastics, rail and other transportation equipment, and forestry products.
These growth numbers are good to see, and as the global economy gains momentum through the year, so should export growth. Nevertheless, 2010 is still a year of caution. First, although growth numbers are back in the black, levels of activity aren’t – even after this year’s growth, production will still be well below previous peak levels. Fulsome recovery awaits more aggressive increases. Second, public stimulus is lifting current numbers – a good thing, but recovery in underlying demand (the kind that leads to a more typical recovery) is still about 6 months away. Third, the world economy still has a few more hurdles to overcome before a sustained recovery can get underway.
Although growth has begun, recession will continue to weigh on certain industry sectors. Consumer goods will see a further 4% decline, owing to the higher Canadian dollar and sluggish US consumer demand. Rebound will elude advanced technology, as a small decline stretches the sector’s losing streak to 3 years. The aerospace sector, which lags the economic cycle, will see shipments fall 10%. Finally, weak pricing will lean heavily on fertilizer shipments, with exports heading for a 23% drop.
The bottom line? In general, growth has returned to Canada’s export sector. Key challenges remain, and certain sectors will continue to weather declines, but upward momentum through the year will create better conditions for all, and we are now that much closer to the start of true recovery.