One year ago, Canadian exporters were a very gloomy bunch, and with good reason. The recession everyone else was still fearing had already hit exporters hard, and things were getting worse. In fact, 2009 dealt exports their worst drubbing in recent memory – by a factor of six, no less. In this context, it is hardly surprising that exporters are now feeling much more confident about near-term prospects.
No one can accuse exporters of being caught off-guard. They were worried about deteriorating conditions back in the fall of 2007, according to EDCs Trade Confidence Index (TCI). Results from the semi-annual survey plunged further, hitting an all-time low in the fall of 2008. The Index recovered decently in the Spring 2009 survey, but remained well below the historical average level – indicating that Canadian exporters were still under significant duress.
In the latest survey, exporters shrugged off the gloom, and are in growth mode. The TCI increased dramatically, rising almost 9 points to 77.4, well above average and the highest Index reading since the spring of 2002. This is the TCI’s largest rebound in the post-9/11 period, and is in keeping with movements in other business outlook surveys over this period. The survey was conducted in late October and early November of 2009, and reflects nascent growth in exports at the time.
High hopes for the global economy boosted overall results. Close to half of respondents expect global economic conditions to improve in the coming six months, up sharply from just 11% one year ago. Exporters expect to capitalize on better global conditions. After sinking in the last two surveys, the share of exporters expecting better near-term foreign sales swelled to 48%, the best result in five surveys. More than ever, Canadian exporters see an improvement in international trade opportunities. These results are impressive, but don’t necessarily portend aggressive growth. Exporters are still in a big sales chasm, and the survey indicates that they fully expect to start climbing out of it this year.
Optimism has also been boosted by the strong domestic economy. Over the last two surveys, the share of exporters expecting the Canadian economy to improve has surged. This cured the recent gloom about sales on the home front, with 46% of exporters expecting a near-term improvement.
The more bullish mood was shared in all industry sectors. Those in the information, communications and technology sector were again the most optimistic overall. Both the light manufacturing and the infrastructure & environment sectors experienced the largest increases in TCI scores. In the former case, a very beleaguered industry is turning the corner. In the latter, huge public stimulus funds are thought to underpin optimism. The boost in the transportation sector is also thought to be stimulus-related. Resource-based industries remain the least optimistic, reflecting weaker pricing and demand.
Confidence appeared to be unbowed by the high Canadian dollar. At survey time, it was apparent that the mid-year strengthening of the currency was persisting. In response, more exporters are looking at hedging strategies and are altering their business models to cope with currency movement.
The bottom line? Exporters have endured two very tough years that have pummelled sales. In this context, their optimism is particularly inspiring. Their message is clear: ‘It’s all up from here’.