New trade indicator suggests positive economic picture ahead

Tracking monthly trade patterns can be like watching a yo-yo.

A new leading indicator, published by Export Development Canada Thursday, aims to reflect the health of the country's exports and what lies in store.

Research has shown a causal link between use of the export agency's insurance business and Canadian export volumes. Rising claims tend to reflect a tougher trade environment and thus falling exports, while falling claims point to a better export picture.

Exports are a weak spot of the Canadian economy and remain below pre-recession levels. The last reading on trade, for February, showed a 0.6-per-cent drop in exports, marking 11 straight months of deficits. The Bank of Canada and other economists are hoping a pickup in exports this year will drive economic growth as other drivers of the activity – housing, government spending and consumers – soften.

EDC's claims-to-premiums ratio tends to have an inverse relationship with exports. So what does the agency's new indicator show now? More weakness in March, with a 0.3-per-cent drop from a year earlier. But then a slight pickup in April, with expected exports rising 0.1 per cent.

"While the recovery may appear tentative at times, leading indicators [such as its new indicator and commodity prices] suggest a more positive picture going forward," the agency said.

Most economists do expect exports to rev up later this year as the U.S. economy – and its housing market – gain steam.

Other grounds for optimism? Commodity prices have been rising since November, a "harbinger of good news for Canadian exporters," it said.