U.S. Recovery Set to Power Next Global Cycle, Immediate Boon for Canadian Companies: EDC

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Export Development Canada Nov 04, 2014

A new global economic forecast by Export Development Canada (EDC) predicts that the momentum of the nascent U.S. recovery will be the key driver of the next global growth cycle.

EDC is Canada’s leading provider of small business financing and insurance for companies with sales or business outside of Canada. EDC’s economics team is widely considered to be among Canada’s leading trade experts, who share their knowledge freely with Canadian companies to help them grow their international sales and manage the associated market risks.

“U.S. consumers and businesses are back, and this is already translating into solid Canadian export growth. Others aren’t far behind. U.S. growth will translate into higher activity in other OECD economies and in emerging markets,” said Peter Hall, Chief Economist for EDC. “The driver is the U.S., and it is well-positioned to power up economies that are in gear. It’s all happening quickly, so for Canadian companies active in trade, or even considering it, it’s crucial for them to ensure they’re in gear too.”

EDC’s forecast for the U.S. economy is overall growth of 3.6 per cent in 2015, which is higher than most forecasts. The outlook notes positive movements in consumer and corporate confidence as a key signal that pent-up demand in the U.S. economy will continue driving growth forward.

“If pent-up demand means that consumers and businesses now have to get out there and spend, a second critical development means that they now actually want to,” explained Hall. “For the first time in five years, confidence has staged a solid return to levels consistent with sustained economic growth. In just over a year, indexes of both consumer and business confidence have moved from recessionary levels into the ‘normal’ zone.”

The resurgent U.S. economy and the lower Canadian dollar have already paid dividends to Canadian exporters. Real merchandise exports are on an 8-month surge, and are currently up 12 per cent year-on-year. This strong performance was also bolstered by the Eurozone importing from Canada at a respectable rate, despite recent macro-economic weakness. Canadian export growth is forecast to reach 11 per cent this year and 6 per cent in 2015.

The forecast also noted that Canada’s export growth spans a wide variety of Canadian industries and extends across almost every province, and is expected to be a boost to trade-related business investment. This is the case despite expectation of persistent weakness in commodity prices. As a result, tightening industrial capacity is expected to lead to significant expansion decisions. In spite of weaker domestic performance, Canada’s GDP growth is forecast to accelerate to 2.8 per cent next year, largely thanks to trade.

“Add it all up, and it comes to 4 per cent global growth in 2015, up from 3.2 per cent this year. It’s good news for Canadian companies, but it doesn’t guarantee growth; that depends on a lot of additional factors,” added Hall. “Fortunately, there’s good news on this front. Recent weakness of the Canadian dollar is likely to persist. All in all, a positive picture for Canadian companies exporting to the U.S., and in short order, the rest of the world.”

EDC’s forecast calls for the Canadian dollar to hover in the low-US-90-cent level for the next two years.

EDC’s semi-annual Global Export Forecast addresses the latest global export conditions including perspectives on leading economic trends and export strategies to help Canadian companies maximize their export growth. The forecast also analyzes a range of risks for which exporters should be prepared.

EDC is Canada’s export credit agency, providing financing and insurance solutions locally and around the world to help Canadian companies of any size respond to international business opportunities. As a profitable Crown corporation that operates on commercial principles, EDC works together with private- and public-sector financial institutions to create greater capacity for Canadian companies to engage in trade and investment.

For more information about how EDC can help your company, visit www.edc.ca.