Canadian exports expected to grow in 2012: EDC
January 12, 2012 by Julian Beltrame The Canadian Press
Canadian exports will continue to grow this year in the face of a global slowdown, and it’s the U.S. consumer that’s likely to come to the rescue, the federal government’s export agency said.
Export Development Canada, a self-funded Crown corporation that assists Canadian companies doing business abroad, forecasts foreign sales will rise by six percent this year.
The EDC also significantly lowered its estimate for global economic growth, but chief economist Peter Hall maintains that the United States will more than make up for whatever is lost in the rest of the world, particularly in Europe.
Hall said he’s usually “not big on decoupling arguments,” which maintain that one country or region can significantly outperform others in an integrated global economy, but added “it does seem like the U.S. is pulling away from the pack.”
“The momentum is rising there. This is not a flash in the pan.”
Hall said the U.S. appears to be getting over its late-fall pessimism — consumer spending is continuing to grow, particularly on volumes, factory activity is strong, the housing sector is coming off multi-year lows, and employment is picking up.
As well, a global slowdown should keep commodity prices in check and the Canadian dollar below parity for most of 2012, making Canadian exports more competitive abroad.
But the big factor is the U.S. consumer, says Hall.
“The U.S. consumer has been down so long, the cork is making its way back to the surface. This is the beginning of the recovery.”
A survey of districts by the U.S. Federal Reserve, released in its so-called Beige Book, found unusual optimism from the central bank, calling the final weeks of 2011 strong, triggered mostly by consumers stepping up travel and spending.
Economists noted that it has been some time since the Fed used words like “vibrant” and “robust” to describe aspects of the American economy. But the Fed still called the housing sector weak.
“Consistent with hard economic data releases, the latest Beige Book points to an economy vastly improved from the summer and fall months of 2011,” said TD Bank economist Alistair Bentley.
The EDC expects Canadian exports of forestry products will increase by 12 percent this year, the aerospace sector by 16 percent and the automotive industry by 21 percent — all three feed mainly into the U.S. market.
Oddly, the agency said exports in Canada’s booming resource sector will be weaker, with energy flat, metals up only 3.2 percent and agri-food up by 2.7 percent.
But that is mostly due to price effects, said Hall, since the EDC is counting on the loonie averaging about 98 cents US during the year. Volumes will still remain relatively strong.
Price effects and starting from a higher base also partly explains why export growth — which is measured on the value of exports, rather than amount — will slow this year to six percent from a strong 11 percent gain in 2011.
“The slightly lower dollar and rising U.S. production, alongside decent emerging market growth, will power sales of higher-value Canadian exports,” said Hall, especially in volume of sales.
Hall sees the U.S. outstripping Canada in growth this year for the first time in several years, with an expansion of 2.9 percent south of the border and two percent north.