As 2021 comes to a close, the latest bi-annual Trade Confidence Index (TCI) survey from Export Development Canada (EDC) shows that Canadian exporter confidence has declined slightly, following an all-time high in June.
The year-end survey suggests that Canadian businesses remain very optimistic about near-term trade prospects, easing back marginally from the well-above-trend spring 2021 reading of 80.5 to 76.9 at year-end. The current confidence index sits well above its historical average, signalling continued strength in the export recovery.
"Canadian exporters are forging on despite the significant negative effects the COVID-19 pandemic is still having on the economic recovery, both domestically and globally," said Peter Hall, Chief Economist at EDC. "Exporters are materially affected by the health and logistical constraints imposed by all global and domestic markets, as ongoing uncertainty with the pandemic remains their top concern.”
Although respondents indicated that COVID-19 is still having a negative impact on the majority of sales, the trend is moving downward. This edition shows that 58% of Canadian exporters, compared to 62% in the mid-year survey, said they were feeling the impact of the pandemic on their business.
Half of Canadian companies reported increased barriers to their international investment and export strategies. Travel restrictions, government restrictions and shipping costs were the three most important constraints to their international growth.
Over the past six months, businesses were faced with significant logistical challenges due to ongoing supply chain issues and skilled labour shortages. To meet increased consumer demand, 58% of Canadian businesses intend to hire staff to fill the labour shortage, which represents a slight increase since the mid-year TCI survey. Additionally, nearly 29% of respondents say that supply chain disruptions are a challenge for their international business, an increase of 16 percentage points since the last TCI survey.
Despite the challenges, the push to diversify export markets continues. In fact, 78% of the respondents indicated that they plan to export to new countries—a record high. For these exporters, the United States, United Kingdom, Australia, Germany, India, Spain, France, Brazil, Mexico and Japan are their Top 10 destinations. Of respondents, 25% also indicated that they plan to invest outside of Canada, a marginal uptick from the mid-year survey.
Other highlights:
- The U.S. remains the top export destination, followed by Australia, U.K., Mexico, France, and Germany.
- 55% of exporters indicated that their U.S. orders increased in the last six months of 2021, up from 43% at mid-year. Meanwhile, 17% of exporters experienced a decrease in U.S. orders by year-end, compared to 23% at mid-year 2021, and 34% at year-end 2020.
- Respondents’ outlook on export and domestic sales continued to be optimistic, building on the strength of recovery from earlier this year. Exporters who think domestic sales will increase over the six months is sitting at 63%, up from 57% at mid-year 2021.
- The role of the Canadian dollar in companies’ abilities to compete in international markets has been relatively steady. If the dollar stays the same, 49% of exporters think their export sales will increase, and 34% feel their investments will increase in the next two years.
- About one-quarter (26%) of the Canadian exporters who answered the survey were part of a women-owned and women-led business.
