Production levels and U.S. orders remain steady despite lower confidence
Confidence among Canadian exporters – in all regions, across all business sizes and in virtually every sector – has dropped below the historical average, according to survey results from Export Development Canada (EDC) released today.
This is the second consecutive decline in EDC’s Trade Confidence Index (TCI) with the latest survey highlighting concerns about inflation, supply chain issues, deteriorating financing conditions and the war in Ukraine.
Confidence among Canadian exporters dropped to an index score of 69 in this mid-year survey, down from 77 at the end of 2021. This follows considerable pandemic-related volatility that saw the lowest ever TCI score of 56 in early 2020, the worst period of the first COVID-19 wave, followed by a significant rally to 81 just one year later.
“The end of COVID-19 restrictions across Canada and the world was supposed to spur opportunity for growth and a return to normalcy,” said Stuart Bergman, Vice President and Chief Economist at EDC. “But the combination of pre-existing headwinds, and now the economic fallout from the conflict in Ukraine, is presenting Canadian businesses with challenges on multiple fronts. Given the high level of uncertainty, it’s not surprising to see confidence down and a pullback in companies looking to export into new countries.”
While the dip in confidence was expressed across all sizes of businesses, small-sized businesses reported the largest decrease of 9.6 percentage points. One-third (34%) of all respondents said supply chain and logistics management represent their biggest challenges, followed closely by rising business expenses (29%) and hiring highly skilled workers (28%). Further, close to three quarters (74%) of respondents indicated inflation has negatively impacted their business.
More than one-third (36%) of respondents said they experienced challenges due to the ongoing Russia-Ukraine conflict, including difficultly acquiring inputs (14%), delays in contracts (11%), and impacts on overseas business entities (11%).
On a positive note, more businesses are now indicating their production level is approaching or has returned to pre-pandemic levels. Further, 62% of respondents are producing at a greater level, same level, or between 80%-99% of pre-pandemic capacity. Only 20% of respondents indicated their production level is less than 60% before COVID-19. Overall investment intentions are holding with some retrenchment for investing in international markets. Respondents also reported their U.S. orders are holding steady, which is good news, as it builds on gains from 2021. The U.S. is the top export destination as noted by 78% of respondents, followed by the United Kingdom, Australia, and Mexico.
- The extractive sector was the only sector to show increased confidence during this survey. All other sectors, including ICT, transportation, infrastructure, and environment, decreased.
- All five TCI elements (domestic sales, export sales, domestic economic conditions, world economic conditions, and international business opportunities) declined in overall confidence during this period. The largest decrease concerned world economic conditions, with a drop of 3.4 points.
- The survey indicated accessing skilled labour remains difficult for export-focused companies (43% versus 44% at the end of 2021).
- Fewer respondents now plan to export to new countries (64%), down from 78% six months ago. Additionally, 21% plan to invest outside Canada, a reduction of four percentage points.
Export Development Canada (EDC) is a financial Crown corporation dedicated to helping Canadian businesses make an impact at home and abroad. EDC has the financial products and knowledge Canadian companies need to confidently enter new markets, reduce financial risk and grow their business as they go from local to global. Together, EDC and Canadian companies are building a more prosperous, stronger and sustainable economy for all Canadians.
For more information and to learn how we can help your company, call us at 1-800-229-0575 or visit www.edc.ca.
Export Development Canada