Trade Confidence Falls to Record Low

(Export Development Canada – Peter G. Hall)

Confidence tumbled last fall on a number of fronts. Market turbulence, rising retail prices and economic weakening pummelled consumer and business confidence. Canadian exporters, on the front lines of the global slowdown, were big contributors to the growing sense of gloom.

EDC surveyed Canadian exporters last fall in the middle of the maelstrom that hit financial markets. Responses from 850 small, medium and large exporting firms were collected between mid-October and mid-November last year. Results show that the Trade Confidence Index (TCI) plunged to 61, a record low over the Index’s short history. Confidence last fell in 2001, but compared to this result, still remained at a relatively high level.

All five components of the TCI fell in the latest survey. The largest single drop was in domestic sales prospects. Over the past five years, exporters were able to count on a strong domestic market to tide them through the relentless rise in the Canadian dollar. Last fall, that upbeat view of the domestic scene soured considerably. Just 28% of respondents – the lowest share ever by a wide margin – expected a near-term increase in domestic sales. Those surveyed were likewise very gloomy about the outlook for the domestic economy. Just 12% expected improvement, while those seeing worse conditions spiked to 57% of respondents, a new record by a wide margin.

Prospects for export sales also took a large hit. Those who expected a decrease surged to just under a quarter of all respondents, while 39% expected an increase, down 8 percentage points in just six months. With export sales currently in recession, these results are not comforting. What is more, exporters’ gloomy domestic outlook was trumped by their pessimism about the global economy. Only 11% expected conditions to improve, while 64% foresaw a worsening situation.

Of all the TCI components, exporters were least jaded about international opportunities. The TCI score for this category hardly moved, thanks to the one-third of respondents who felt that near-term opportunities would get better. This is surprising in view of last fall’s economic and financial market turmoil, but it possibly reflects the success that exporters have experienced in recent years trading with non-traditional markets. Sales in these markets have risen at a double-digit pace, well ahead of the consistently meagre growth in sales to the United States.