Lost decade for Canadian exports
With exception of China, CIBC report says country yet to break into emerging markets
Canadian exporters have yet to emerge from a “lost decade” of missed opportunities to broaden their reach into developing markets, according to a new report.
While companies have done well to break into the tough Chinese market, Canadians have been far less aggressive when it comes to emerging nations, CIBC World Markets said Tuesday.
This is limiting Canada’s ability to grow the economy at a critical time of global uncertainty.
“The volume of Canadian exports today is at the same level it was a decade ago,” said Benjamin Tal, CIBC deputy chief economist. “Regardless of how you look at it, this was a lost decade for Canadian exports. The lone bright spot has been in the very competitive Chinese market.”
Canadian exports to China represent slightly more than one per cent of total shipments to that country, although this country’s share of the market has still managed to edge up over the 10 years, according to CIBC.
“In contrast, most other developed countries have seen their share of Chinese imports fall over that same period. And it is not an oil story, with petroleum only a small proportion of Canadian shipments destined for China,” it said.
At the same time, Canadian exporters have been “holding their own” against Chinese manufacturers attempting to expand into the United States.
“This success demonstrates that Canada can and should compete in other emerging markets,” Tal said.
Canada’s export performance has been a source of concern for Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney, both of whom have been urging companies to increase their efforts to break into more emerging markets.
With consumer debt at record-high levels and the housing market showing signs of cooling, Canada will need to rely more on business investment and stronger exports to pull the economy out of its post-recession slowdown.
Many companies have been hesitant to expand their markets in an uncertain global economy, and that — along with weak domestic demand has — has kept Carney from raising the central bank’s trendsetting interest rate, which has been at just one per cent for two-and-a-half years.
The bank is widely expected to again leave that rate unchanged on Wednesday, when it will also issue its quarterly Monetary Policy Report on latest economic outlook for Canada.
Meanwhile, the CIBC report was released on the same day that Statistics Canada said factory sales rose in February by the fastest pace since July 2011.
Sales were up 2.6 per cent, led by transportation-sector shipments, even as manufacturers received four per cent fewer new orders in February.
“While the pickup in the volume of manufacturing sales in February is encouraging, part of the increase reflected rising sales in the lumpy aerospace component, which have much more muted implications for monthly production estimates,” RBC Economics said.
“As well, a slowing in inventory growth January suggests that part of the gain in sales outside of the aerospace component was drawn from existing inventories rather than new production.”