After hitting an all-time low at the start of the pandemic, EDC’s Trade Confidence Index (TCI) increased by a whopping 19%—the biggest gain in our survey’s history. With this second straight blockbuster surge, the TCI is now at its highest level in more than 20 years.

This time around, our index rose from 67.5 to 80.5, reflecting the significantly improved prospects for a sustained global economic recovery. The EDC survey, which began in 1999, was conducted between April and June.

Broad-based recovery

Much like in our year-end 2020 survey, the recovery was robust and broad-based. Canadian exporters are growing more optimistic, from coast to coast, on a wide variety of topics. All five TCI index elements rose, led by improved outlooks for overall economic conditions—both domestic and global. All regions made gains, with Quebec taking the mantle from Ontario as “the most trade-confident” region of the country. All firm sizes picked up, especially small companies, who’ve been hit hardest during the pandemic. 

The index also rose across all sectors. Transportation (which includes autos and aerospace) had the largest gain. Information and communication technology is now the most confident sector, potentially reflecting the rapid shift to online activities during the pandemic. Conversely, extractives (which includes oil and gas) are the most pessimistic sector, reflecting weaker investment intentions as the decarbonization push intensifies.

A little more than one year ago, the initial COVID-19 shock and lockdowns led to the steepest drop ever in global economic activity, which was mirrored by the largest TCI decline since our survey began. Fortunately, our last two surveys—taken together with trade data that have generally exceeded expectations and upgrades to EDC’s Global Economic Outlook—demonstrate that economic momentum is building, as vaccine rollouts progress and countries take further steps to reopen. 

As a result, despite ongoing bottlenecks in global supply chains, this level of exporter exuberance suggests Canada’s trade is likely to continue its strong performance in the second half of 2021 (see chart). 

Rebound continues in 2021

Canada’s renewed exporter confidence is clearly benefiting from the strong economic recovery south of the border. In this survey, a growing share of companies reported that their orders from the United States have improved. Looking ahead, expectations for overall export sales in the next six months have returned to pre-pandemic highs, with almost three-quarters of firms (73%) forecasting gains.

While the slight softening of investment plans is one of the few disappointing results, hiring intentions are as robust as can be, with more than half of firms saying they plan to increase employment in the next six months. As labour markets tighten, one-third said it was very difficult to access skilled labour. This finding is consistent with the Bank of Canada’s latest Business Outlook Survey, which cited labour as the most common bottleneck, particularly in skilled trades, IT-related work and in remote regions.

The pandemic’s impacts have been highly polarizing in the “K-shaped” recovery. While sales for most firms (62%) have been negatively affected, production levels are clearly improving and a growing number of companies are now reporting positive impacts, which at 28%, is double last year’s rate. These results show that companies are adapting to new ways of work, and increasingly pivoting their production to take advantage of new demand trends.

Challenges on connecting, protectionism and currency

The top reported international business challenge remains connecting with potential customers, an activity that’s become harder to do in person due to restrictions, including those on non-essential cross-border travel.

Trade protectionism remains a concern for one-in-three exporters, with some specifically highlighting “Buy American” issues or tensions in Canada-China relations. Fortunately, our survey suggests protectionism worries have started to wane under the new Biden administration. 

In the past year, the Canada-U.S. dollar exchange rate has steadily strengthened, from a low of 70 cents early in the crisis, into the low-80 cents range. This currency appreciation has awakened from a long-dormant issue to rank near the top of the list of exporters concerns. In fact, almost half (47%) of exporters indicate that value of the currency is “very important” for their ability to compete in international markets.

Most firms expect financing conditions to remain largely unchanged over the next six months. Indeed, our recent COVID-19-impact survey showed that reported financing needs are far less urgent than at the start of the pandemic, reflecting the effective response of government liquidity supports alongside increased banking sector forbearance. 

The diversification push continues

The number of firms planning to export to new markets and invest outside Canada continues to be high. Two-thirds of respondents plan to export to new markets. And for firms looking to expand their exports, the United Kingdom and Australia are top of mind. In the context of a stronger currency, almost one-quarter plan to invest outside Canada, with a focus on the U.S., China, Europe, and into the United Arab Emirates and Brazil. 

What a difference a year makes

This time last year, COVID-19 case counts were rising, stringent lockdowns were in place across much of the world, and there was little hope of an effective vaccine on the horizon, causing many Canadian exporters to face a once-in-a-lifetime challenge to keep their businesses afloat.

Now many in advanced economies have received a vaccine and Canadian exporter confidence has risen rapidly to heights unseen in decades. EDC Economics expects the global economic recovery to kick into a higher gear in the second half of the year. The broader U.S. reopening will be a key driver as American households draw on their significant accumulated savings to satisfy “pent-up” demand, which may see supply struggle to keep pace. 

Our survey also suggests that an accelerating recovery may bring its own challenges. These include the perennial need to (re)connect with customers, tighter labour markets, supply bottlenecks and shipping delays, a relatively strong Canadian dollar (which benefits import purchasers, but can make it harder to compete on price in export markets), and perhaps continued pockets of protectionism. 

While we’re thrilled with the current survey results, we look forward to our year-end TCI survey in December to check in on the trade recovery, and find out if Canadian exporters’ exuberance will continue.


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.