‘Finally some real momentum’ on exports
Quebec’s exports have been sluggish for much of the last decade, but a recovery that began last year is set to continue, predicts one of the country’s leading trade analysts.
The province’s international exports grew seven per cent last year, despite the global economic uncertainty, and should increase at the same pace both this year and next, says Peter Hall, vicepresident and chief economist at Export Development Canada.
“There is finally some real momentum in Quebec’s international exports after years of flat growth and declines until 2011,” he says.
Strong prices for commodities in the natural resource sector will lead the way for exporters, as will higher aircraft deliveries from the province’s aerospace industry.
Quebec’s exports are normally dominated by three key sectors. The biggest, accounting for nearly 40 per cent of exports, is the sale of industrial commodities such as aluminum, which should see a modest expansion over the next year.
New investments in nickel and iron ore could provide additional opportunities for growth, according to Hall, and recovery in the U.S. housing sector will also help demand.
Exports of machinery and equipment make up 13 per cent of Quebec goods sold internationally and should rise by five per cent this year and eight per cent in 2013.
In the transportation sector, exports should grow by eight per cent, based on the expectation that Bombardier will have a strong year for deliveries, particularly for business jets.
Hall is in Montreal Friday to meet with business groups to share his view that the global recovery is for real. The conventional wisdom has been that perpetual sluggish growth is the “new normal” for the world economy.
It’s easy to see why people have lowered their expectations. As Hall says, “over the past three years, the world economy has made two valiant attempts at recovery, only to shrink back into mediocre growth.
“A third attempt is underway, but current and looming fiscal cutbacks have many convinced that it too will fizzle.”
When you add a European recession, slowing emerging economies and volatile commodity prices to the mix, the odds against a sustained recovery may look even longer.
But recent developments don’t support that view, especially in the U.S. which remains our largest trading partner by far.
The U.S. has had to work off a lot of its pre-recession excesses, but there are signs of pent-up demand across the board, from housing to autos, Hall says. U.S. consumer spending is rising at a strong pace and employment is finally responding.
It’s true that significant cuts to public spending will weigh on growth everywhere, but in many cases, the private sector is being helped by U.S. strength, he argues.
While there are considerable risks on the table, such as Europe’s sovereign debt problem and tensions in the Middle East that could affect the oil market, the improving economic numbers are hard to ignore.
A reviving U.S. economy and ongoing diversification of trade will lift Canadian exports by 7.1 per cent this year and 7.3 per cent in 2013, Hall says.
“What we’re back to is more real-style growth. The notion that the U.S. is leading the world isn’t just theory any more, it’s backed up by fact.
“If you look at the trends in housing, autos and consumer spending and in factory orders, the results are consistently impressive. We now have quite a few months of data that are strong.
“I’d be less excited by these numbers if they were happening everywhere, but what is amazing about this is that the U.S. economy is growing strongly quite in spite of what’s happening in the rest of the world.”
Hall believes the strong Canadian dollar won’t be a drag on Canadian sales into the U.S. because exporters have had plenty of time to get used to a stronger currency and we’re no longer seeing the dollar appreciating by eight to nine per cent a year. In fact, it may slip below par this year, he says.
He sees the slowdown in Asia as a temporary phenomenon that will increase pentup demand for imports of goods and services.