Export Development Canada’s biannual Trade Confidence Index (TCI) survey improved to 70.1 index points this spring—continuing the volatile trend of the last four years. Exporters continue to point to geopolitics, trade barriers, high interest rates and persistent inflation as impediments to their business, causing the headline result to remain below its historical average of 72.7.

Despite the seemingly endless challenges facing the world and global trade, prospects of a resurgence in economic activity buoyed Canadian exporter sentiment since our last survey, released in December 2023.

The TCI, which has been conducted by EDC since 1999, is an index score made up of five key elements. It reflects the outlook on world and domestic economic conditions, domestic and export sales and international business opportunities.

While confidence on all elements improved in this round, it was the outlook for world (+1.9 index points) and domestic (+1.3 index points) economic conditions that strengthened the most. As major central banks prepare for a monetary policy pivot, expectations of more favourable financing conditions are apparent, with more respondents expecting conditions to improve and fewer expecting them to worsen.

The index also rose across all regions and business sizes. Large businesses showed the most exuberance, notching a TCI score of 74.4, while Ontario and the West outperformed the national average. From a sector perspective, while improvements were generally broad-based, exporters in the infrastructure and environment and extractives sectors recorded the highest levels of confidence.

Exporters in the resources sector, meanwhile, registered the weakest levels of confidence. Broad improvements could be behind positive readings in the more horizontal sectors, like transportation and information and communications technology, with these sectors noting the largest jumps from the previous survey round.

Despite the more positive outlook, respondents remain concerned about several critical issues. Most notably, more than 90% experienced some form of barrier to trade in the past six months, including elevated shipping costs, volatile economic conditions and higher inflation and interest rates.

Unsurprisingly, supply chain constraints were identified as the second most critical risk in the next six months, just below the risk of global recession. Of those currently dealing with supply chain issues, 67% cited issues related to suppliers and 52% pointed to transportation hurdles, such as shipping and logistics.

Geopolitical uncertainties loomed large this time around, with more than half the world’s population going to the polls in 2024 and elections top of mind for respondents. Slightly less than a quarter of respondents report being significantly impacted by the U.S. elections in November, 28% moderately-so and 22% only slightly. Also on exporters’ minds are votes due to take place in the European Union (37%), United Kingdom (31%), Mexico (24%), and India (19%). 

Despite the ongoing volatility, many exporters remain committed to their plans to diversify. Close to three-quarters (71%) plan on exporting to new markets in the next two years, a healthy five percentage point increase since year-end 2023.

Exporters are also keen to invest abroad, with 20% of respondents already having some form of direct investment in a foreign market and 26% planning to invest outside Canada. Of those already invested abroad, 64% expect an increase in the sales of their foreign affiliates over the next six months and 47% plan to increase the size of their foreign holdings.

For the first time, we also incorporated insights on the emission reduction efforts of Canadian exporters. We found that a majority of our sample was undertaking direct greenhouse gas emissions (GHG) reduction activities, such as reducing waste (66%), increasing recycling (63%) and reducing energy consumption (51%). Fewer had set net zero targets (19%) or were measuring (20%) and reporting (17%) GHG emissions. Most of the planned emissions reduction activities were centred around choosing sustainable suppliers (30%), setting net zero targets (29%) and switching to renewable energy (29%).

The bottom line?

Still-soft global demand, ongoing policy uncertainty and rising levels of geopolitical volatility continue to hang over the global economy. Notwithstanding the challenges, exporters appear to be holding on to hopes of improving economic conditions. Our latest TCI shows that trade confidence remains resilient, as exporters appear ready to move beyond their post-pandemic malaise.

This week, a very special thanks to Prerna Sharma, senior economist in EDC’s Economic & Political Intelligence Centre.

As always, at EDC Economics, we value your feedback. If you have ideas for topics that you’d like us to explore, please email us at economics@edc.ca and we’ll do our best to cover them.

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