The mood of long-suffering Canadian exporters is on the upswing again.
Optimism among exporters has improved for the third consecutive time, and is now higher than it was when the global economy was booming before the Great Recession, according to Export Development Canada’s semi-annual Trade Confidence Index.
The index, being released Thursday, rose 1.8 points to 77.2.
“The U.S. and the [Canadian] dollar seem to be the two drivers behind all of this,” said Peter Hall, EDC’s chief economist.
Exporters are now convinced the U.S. recovery is real, he said. The lower dollar – trading at roughly 92 cents (U.S.) – is a bonus for exporters, who last year feared that currency parity might be the new norm, Mr. Hall added.
The EDC’s confidence index also perked up in late 2009 and early 2010, when the global economy went into what Mr. Hall called a “false recovery.” Then, like now, the index rose three straight times, peaking at 78.8 in the spring of 2010.
This time is different, he said. “What we are seeing now is three movements in the right direction that seem to be a whole lot more stable [than] the back and forth we’ve seen up until now.” “This looks like pretty resilient 1-2-3 increases in optimism.”
Canadian exports have lagged badly in recent years and remain below prerecession levels. In April, Canada recorded a small $638-million deficit, dragged down by weak exports to the U.S.
The survey is a bit of good news for Bank of Canada Governor Stephen Poloz, who has warned that without an export pickup, Canada could suffer from persistently weak economic growth and disinflation.
Mr. Hall pointed out that optimism has been rising, in spite of considerable bad news coming out of the U.S., including last fall’s threatened government shutdown, concerns about the housing market and harsh winter weather.
That optimism is poised to show up in export results, according to Mr. Hall.
“The U.S. economy coming back is a story that’s been masked by temporary factors,” he said. “We see that blowing wide open as we go forward.”
Among the highlights of the survey of 1,000 Canadian companies, conducted between March 24 and April 4:
- Sixty-one per cent of respondents expect higher exports over the next six months, up from 55 per cent in the fall.
- Half of those surveyed plan to diversify their export markets in the next two years.
- 37 per cent identified the lower dollar as their primary reason for optimism, sharply higher than in the fall.
- 58 per cent said a lower dollar has had a positive effect on export sales.