Ontario poised to lead country’s exports
Cross-border auto sales help boost province as oil weighs down N.L. and Alta., report finds
Ontario is on track to post one of the strongest export performances in Canada in 2016 as higher U.S. demand and a lower dollar boost cross-border sales of autos and other manufactured goods, a report says.
The province is expected to see 7 per cent higher exports this year even as the national outlook for exports falls to 2 per cent on continuing weakness in Canada’s energy industry, Export Development Canada (EDC) said in its twice-yearly forecast.
“We’ve had to sustainably downgrade our energy forecast because of the blowback from prices that are much lower than we had (previously) forecast,” EDC chief economist Peter Hall said in a telephone interview Tuesday. “The good news for Ontario is it’s mostly elsewhere that it’s happening.”
EDC now expects the North American benchmark for crude oil will average $40 (U.S.) a barrel this year. That’s down from its fall forecast for $56 a barrel for 2016.
Weaker oil prices will continue to weigh on the energy-dependent provinces of Newfoundland and Labrador, Alberta, and to a lesser extent Saskatche- wan, the report notes. While the impact will not be as dramatic as in 2015, when oil and gas companies slashed future production and jobs, more energy sector cuts are planned, Hall noted.
As a result, EDC lowered its national forecast for export growth to 2 per cent in 2016, from its previous expectation for a 7 per cent gain.
“The good news is we have a two-speed economy. We have industries that are growing at a double-digit pace. They are (more than offsetting the negatives). That’s why you have a positive on the bottom line,” Hall said.
Ontario automotive exports, which account for 40 per cent of the province’s exports, are expected to rise 10 per cent this year, mainly on higher U.S. demand, the report noted.
At a separate event in New York, Bank of Canada Governor Stephen Poloz said investors shouldn’t fret about the sharp decline in global trade growth since 2010.
“The weakness in trade we’ve seen is not a warning of an impending recession,” Poloz said in remarks prepared for a speech to Canadian and U.S. securities industry associations.
He said he’s confident most of the trade slump will be reversed as the global economy recovers, even if it’s at a slow pace.
Global trade could also benefit from future efficiencies in international supply chains, the signing of additional trade agreements, such as the Trans-Pacific Partnership, and the creation of new companies, he said.
It’s unlikely global trade will return to the heady 7-per-cent average annual growth rate seen in the 1990s and 2000s, Poloz said, noting much of that was driven by new trade deals that paved the way for the creation of global supply chains.
“This process of integration simply could not continue at the same pace forever,” Poloz said.
Trade collapsed in the wake of the financial crisis of 2008, rebounded sharply in 2010, and then slowed again dramatically, he said.
Weak business investment in the advanced countries and slowing growth in China have both contributed to the recent slump in international trade, he said.
In Canada, exports are expected to rebound in 2017, rising 6 per cent on strengthening prices of crude oil and natural gas, EDC predicted in its report.
Ontario will continue to be a major driver of the gains, the Crown corporation said. “High income growth, high employment, rock-bottom gas prices and considerable pent-up demand caused by postrecession thrift are all combining south of the border to create the perfect recipe for demand,” Hall said. With files from Star wire services