Canada’s exports are caught between global mega-shifts in both opportunities and risks. On the positive side, global growth is strong, and the primary driver is our top customer. In addition, our US sales now enjoy more certainty, with the signing of the USMCA agreement. A further plus is the steady diversification of exports to fast-growing emerging markets. Weighing on the outlook are the dual threats of protectionism, rising interest rates and the consequent turbulence in emerging markets. In this context, how are Canada’s provinces and industrial sectors expected to fare?
It’s not rare to see radical differences in growth among the provinces in any given year, given their contrasting industrial makeup and differing dependencies on world conditions. 2018 was no exception, producing more outliers than average performers. Things are expected to be more settled in 2019, but there are a few notable exceptions.
Top performing provinces
Newfoundland and Labrador will again be top of the heap, and by quite a large margin. Outsized growth is directly due to the ramp-up of production from both the Hebron offshore oilfield and the Vale nickel processing plant at Long Harbour. Small-but-mighty Prince Edward Island is expected to grab second spot. After a soft 2018, next year should see frozen food exports and gains in the aerospace sector vault the province to 8 per cent export growth. All told, it will be a good year for Atlantic Canada as New Brunswick adds 6 per cent in 2019 to its double-digit expansion this year. The reasons? Positive commodity prices, fishing sector success and rescinded US duties on newsprint.
On the other end of the scale are two provinces taking a pause after banner-year performance in 2018. Both Alberta and Nova Scotia are expected to notch 11 per cent growth this year. Alberta’s performance has a lot to do with production increases at the Fort Hills oilsands project, but despite export capacity increases in 2019 and the opening of a large potato processing plant in Lethbridge, exports will only manage 3 per cent growth. Weak domestic oil prices won’t help. Strong export potential and diversification to Asia won’t be enough to repeat this year’s growth, but Nova Scotia’s 3 per cent projection for 2019 cements this year’s gains.
Exports in the remaining provinces will float in the 4-5 per cent range. In Quebec’s case, it will come off 6 per cent growth this year, and will gain its oomph from the aerospace, mining and electricity sectors. Ontario will match Quebec’s 4 per cent performance in 2019, but in its case will accelerate from a slight decline this year. Flat US auto sales are a key factor, offset somewhat by stronger machinery, mining, and consumer goods exports. Investment in new export capacity could see a lift, thanks to the USMCA deal. Manitoba and Saskatchewan will also be in the middle of the pack, although their agri-food prowess positions them well for future global demands.
Top industrial performers
Topping the industrial charts with the second consecutive year of double-digit growth is the aerospace sector. Strong global demand and orders for the A220 should produce a 10 per cent gain in 2019. Next in line is the machinery and equipment industry, which thanks to US growth, corporate tax cuts and tightening industrial constraints is expected to repeat this year’s 8 per cent performance. Just behind this is the forestry sector, at 7 per cent thanks primarily to stronger US housing starts.
Growth will be constrained by industries that command a high share of exports, but have a muted 2019 outlook. The energy sector is pausing after two very impressive years and the headwind of soft domestic prices. Autos and parts, another weighty category, has bumped up against peak US sales. And with their strong presence in overall exports and their considerable longer-term global promise, agri-food exports will rebound from a soft 2018 decline, but see just 4 per cent growth in 2019.
The bottom line?
Final showings at both the provincial and industrial levels can be very different from initial projections. They are subject to shifts in weather, geopolitics, new project announcements and a host of other factors. All told, the outlook is good on both broad fronts, and in quite a few cases, is faced with upside potential.
This commentary is presented for informational purposes only. It’s not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. EDC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.