Global Export Forecast, Spring 2019

Canadian goods exports are forecast to slow sharply after 2018’s healthy performance with a 3% expansion in both 2019 and 2020. This year, strong contributions from aerospace, energy and fertilizers will be offset by declines in forestry and metals. Exports of services continue to make a steady contribution to the Canadian export outlook with a forecast of 4% growth this year and next. While developed markets remain the key export destination for Canadian goods, the diversification trend continues. In 2019, total goods exports to emerging markets are forecast to grow by 4%, just ahead of the 3% growth rate to developed markets. But by 2020, emerging market growth will move to the fast lane, as it will more than double that of developed markets.

Within manufacturing, aerospace is again poised to be the star performer. Exports reached nearly C$19 billion in 2018 and forecast to grow by 14% in 2019, before cooling slightly to 8% in 2020. Industrial machinery and equipment will see exports rise by a healthy 7% this year before slowing to 5% in 2020, owing to healthy demand from U.S. fixed investment. In contrast, automotive exports are expected to remain weak. Following last year’s contraction, the sector will see gains of only 1% this year before dipping 7% in 2020. Positive demand dynamics are expected to support international sales of auto parts and heavier transportation equipment, but are weighed down by a contraction in exports of passenger cars and light vehicles as OEM capacity relocates south of the border.

Canada’s energy sector, which saw 17% export growth in 2018, will advance by a more modest 9% this year as insufficient pipeline capacity erodes nominal gains from stronger prices for Western Canada Select (WSC). Forestry product exports will dip by 7% this year as the strong momentum in U.S. housing starts is insufficient to offset falling prices and weakness in the pulp and paper segment. That said, they are forecast to rebound by 3% in 2020. Weak-to-falling prices and volume in each of the sub-sectors conspire to pull down growth in the overall ores and metals sector this year. However, price gains in other metals will overcome ongoing weakness in both gold and iron ore dynamics into 2020. On the downside, agri-food exports will repeat last year’s softer growth, coming in at 2% this year before rebounding to 6% growth in 2020.

The factors weighing on exports on an industry basis translate into very different provincial export growth forecasts for 2019 and 2020. Beyond that base, in select provinces, the shutdown and then subsequent restart of a few key facilities are key drivers behind very different outlooks across the forecast years. 

In Newfoundland and Labrador, EDC’s outlook has been tempered compared to our fall 2018 forecast as the oil spill and subsequent shutdown of the White Rose platform in November 2018 carries into 2019. However, its return later in the year, coupled with stronger oil production from the Hebron offshore oil platform and recoveries in metal mining, will support near-double digit growth this year. 

New Brunswick is forecast to see a slight contraction in exports as the October 2018 explosion at the Irving refinery is expected to require ongoing repairs and limit production for much of the year. The return of the refinery to full production accounts for the bulk of the bounce in the 2020 outlook. 

Prince Edward Island and Nova Scotia will both benefit from expansions by transportation-related companies. In P.E.I., the expansion of StandardAero’s Summerside facilities in late 2018 will carry positive momentum in exports into 2019. In Nova Scotia, Michelin’s expansion of winter tire production capacity will be a key driver of export growth. Additionally, both provinces will see their agri-food and seafood exports supported in 2020 by the entry into force of the Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade deals as well as the expansion of air cargo capacity at Halifax’s airport. 

A ramp-up in the production of Airbus A220 aircraft and increased gold mining production will support modest export growth for Quebec. However, the continuation of U.S. tariffs on Canadian steel-and-aluminum production will dampen the outlook as the province is home to high levels of production for both commodities. 

Ontario’s outlook is significantly impacted by the uncertainty surrounding ratification of the Canada-U.S.-Mexico Agreement (CUSMA) and the plans announced by a couple of automotive producers to reduce auto production within the province. 

The winding down and closing of several mines in Manitoba from 2018-2020 will hit provincial export growth in stages. Nevertheless, growth in the forecast will be supported by investments in the agri-food sector, like J.R. Simplot’s expansion of its potato processing facility and Roquette’s $400-million pea processing plant. 

Stronger prices for energy products in 2019 as a result of policy decisions and the forecast entry into service of Enbridge’s Line 3 oil pipeline will support Alberta and Saskatchewan’s export forecasts. 

In British Columbia, the province is forecast for stable export growth in 2019 owing to increased production at the Highland Valley and Mount Milligan copper mines.