(OTTAWA) - January 12, 2011

Canadian exporters are less confident about their near-term prospects than they were last spring, according to Export Development Canada’s (EDC) semi-annual Trade Confidence Index (TCI).

“Trade confidence staged an impressive run that took it from the depths in the fall of 2008 to its highest level in eight years in the spring of 2010, thanks to a rebound in export sales and a resilient domestic economy,” said Peter Hall, EDC’s Chief Economist. “Optimism cooled at the tail end of 2010 as perceptions of Canada’s economy weakened and doubts about the international situation grew.”

EDC’s TCI declined to 74.1 in the fall 2010 from 78.8 in the spring of 2010. While the decline is a setback, the TCI remains at a level that is consistent with positive growth in trade. However, the 4.7 point decline was in marked contrast to the three previous increases of 1.4 points (spring 2010), 8.9 points (fall 2009) and 7.5 points (spring of 2008). The fall of 2008 was the lowest point on record, with a score of 61.

The fall of 2010 survey showed a decline in all five elements of the survey, which gauge expectations for domestic sales, export sales, domestic economic conditions, global economic conditions and international business opportunities over the coming six-month period. 

Mr. Hall, however, pointed to one key area that bucked the downward trend.

“For the most part, there is not much to cheer about in this report, with one key exception: in spite of their feelings about economic conditions, exporters were relatively chipper about global sales prospects,” he said.

“Although slightly down from the last survey, 49 per cent of exporters expected increased near-term sales. Put these together with those expecting static sales performance and the number soared to 89 per cent. Most respondents cited growing demand for products and expansion into new markets as reasons for their sales optimism.”

He also noted that exports to BRICM (Brazil, Russia, India, China, Mexico) markets jumped to 44 per cent from 40 per cent in the spring. While last spring 19 per cent of Canadian exporters expected BRICM markets to contribute the most to export sales, this figure jumped to 23 per cent in the fall of 2010.

In the latest survey, the largest change was in perceptions of economic conditions. Exporters registered an identical drop in confidence for both global and domestic conditions. In the spring of 2010, over 30 per cent of exporters stated that both world and domestic economic conditions had improved, but by the fall of 2010, that proportion was cut in half (15 per cent).

The balance of opinion (the difference between positive and negative opinions) decreased significantly in the domestic economic conditions element, to 18 per cent from 44 per cent (near neutral) in the spring.  Similarly, the world economic conditions element dropped to only three per cent from 28 per cent in the spring.

By sector, exporter confidence experienced major decreases in each industry sector in the fall 2010. Industry sectors registering the largest reductions were transportation and non-mineral resources, with absolute drops of 7.4 and 7.1 TCI points, respectively.

By region, the recent slowdown in the economic recovery led to significant decreases in TCI scores across the country. The largest drops were recorded in Atlantic and Western Canada, with a net loss of 6.4 points and 5.3 points, respectively. The drop in the TCI scores for Ontario and Quebec were 4.3 and 4.6, respectively.

By destination, the U.S. remains the market leader for Canada’s exports, with 87 per cent of respondents reporting activities there. Although European countries are the second main Canadian destination market, the share reporting exports to the four key markets (UK, Germany, France and Italy), was down 11 per cent from the spring of 2010. 

For more information about EDC and the Trade Confidence Index, visit www.edc.ca/english/docs/ereports/tradeconfidence/country_information_index_e.htm.

EDC is Canada’s export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC’s knowledge and partnerships are used by more than 8,400 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and a recognized leader in financial reporting and economic analysis.