Global Export Forecast Fall 2018

Canadian goods exports are forecast to follow up last year’s banner performance with another strong 6% expansion in 2018 and 4% in 2019. This year, both commodities and manufactured goods will make strong contributions to the bottom line. Exports of services, of growing importance to the Canadian economy, are forecast to achieve steady growth of 4% this year and next. As has historically been the case, most of Canada’s goods exports will be shipped to developed markets. This said, sales are diversifying as growth of exports to emerging markets will continue to outpace sales to developed markets. This diversification story is occurring across industries.

Within manufacturing, aerospace is expected to see the most impressive gains. Exports are forecast to reach nearly C$19 billion in 2018, a 19% improvement compared to last year and with another 10% of growth slated for 2019. In the Industrial Machinery and Equipment segment, exports will rise an impressive 8% this year and in 2019, propelled by robust expansion in U.S. fixed investment to address capacity constraints and investor-friendly corporate tax changes. In contrast, automotive exports are expected to see negative growth in 2018 before bouncing back a bit next year. Whereas positive demand dynamics are expected to support foreign sales of auto parts and heavier transportation equipment, exports of passenger cars and light vehicles will fall slightly due to longer-lasting structural factors and temporary plant closures weighing on Canadian production.

Canada’s robust energy sector, which saw 34% export growth in 2017, will advance by a more modest 9% this year due in part to volume constraints. Lumber and pulp and paper is set to expand by 12% this year and another 7% in 2019 supported by a combination of solid U.S. housing starts pushing demand and supply constraints in British Columbia. Optimism for ores and metals comes from increased gold production and climbing copper. On the downside, Agri-food exports are softening this year, including seafood where supply is limited.

Forecast headwinds in 2018 and 2019 include global trade protectionism and the repricing of emerging market risk. The main upside risk is faster-than-anticipated trade expansion triggered by the unleashing of pent-up demand in major export markets and globally synchronized economic growth.

Provincial export growth numbers vary widely in 2018. In 2019, while growth will moderate, all provinces are forecast to enjoy solid export growth gains against the backdrop of a more predictable trading environment with the announcement of the new U.S.-Mexico-Canada Agreement (USMCA).

Newfoundland and Labrador will enjoy double digit growth in nominal exports in both 2018 and 2019 thanks to increasing oil production from the Hebron offshore oil platform and the ramp up of Vale’s Long Harbour nickel processing plant. In Prince Edward Island, exports are forecast to contract this year but frozen food manufacturing – PEI’s largest export industry – will support a rebound of 8% growth for 2019. The trade deal with the EU will also open up increased export markets for the province’s agricultural and aquaculture products.

For Ontario, the uncertainty around the future of NAFTA and possible auto tariffs weighed negatively on the outlook for much of 2018. However, the agreement in principle on the USMCA, has removed the auto tariff threat. Coupled with a positive outlook for the province’s mineral, industrial manufacturing/equipment and consumer goods exports, export growth will achieve a solid 4% lift in 2019.

New Brunswick is poised for back to back years of positive export growth thanks to stronger commodity prices, improved conditions in the fishing sector and the US International Trade Commission’s decision to rescind duties against Canadian newsprint exports.

Quebec’s increased aircraft production and expansion of the Éléonore gold mine support a steady 4% export growth outlook for 2019, further buoyed by expectations of new mining production and stronger electricity exports.

The opening of the Touquoy gold mine and implementation of the trade agreement with the EU are supporting the boost in exports for Nova Scotia this year and next. Similarly, increased production at the Highland Valley and Mount Milligan copper mines will lead to stable export growth for British Columbia into 2019. There is also growing optimism for a potential decision point for a $40 billion liquefied natural gas terminal, which could supply gas to Asia.

Despite mixed crop development owing to dry conditions in parts of the province, Manitoba will enjoy double digit export growth this year and 5% growth in 2019. This is supported in part by much needed investment into the province’s food manufacturing industry with projects such as the new $400 million Roquette pea processing plant designed to meet growing global demand for plant-based protein rich foods.

Alberta will enjoy a banner year in 2018 driven in part by the ramping up of oil production for the Fort Hills oil sands project. 2019 will build on this growth, driven by new export capacity growth in the energy sector and the anticipated Fall 2019 opening of the $360 million Cavendish Farms frozen potato processing plant.