Exporters’ Abject Pessimism Fades

(Export Development Canada – Peter G. Hall)

Last fall’s crisis of confidence sent worldwide gauges of business and consumer sentiment reeling. A growing sense that the global economy is no longer in freefall has recently increased the feel-good factor. Canadian exporters concur: the abject pessimism recorded six months ago has faded, with the Spring 2009 Trade Confidence Index posting its largest one-period gain since the post-9/11 surge.

The jump in confidence is needed relief. The Spring result interrupted a three-period tumble dating back to the fall of 2007, with each successive drop setting a new record low level. Market turbulence in the fall of 2008 only deepened what was already a serious loss of confidence. As impressive as the current gain is, it lifted the Index to just a whisker above the previous low point in the Fall of 2001.

Key to improved sentiment is a sense that both global and domestic economic conditions will improve. About one-quarter of respondents see brighter near-term prospects, up sharply from the previous survey. There was an even more dramatic change in the share of those expecting worse conditions. From a clear majority in the past survey, the pessimists shrunk back to about a quarter of total respondents. The remaining half of exporters in the survey expect current conditions to persist – hardly comforting, given the very subdued current levels of international trade activity.

Exporters are less enthusiastic about actual sales prospects. Although 37% of respondents expect near-term international sales to increase, the share fell slightly from the Fall 2008 result, and is well below the 50% norm. Domestic sales are not expected to fill the gap. True, 30% actually expect domestic sales to climb in the coming months, a slight gain over the previous survey – but the share is down from 40% a year earlier. For both foreign and domestic sales, the dominant group is the share of exporters expecting no growth – again, a sobering result given the current state of demand. Read more here.