Exporter confidence rises despite inflation and interest rate challenges

Canadian exporters show increased confidence, expecting global recovery and new market expansion in 2024

Exporter confidence rises despite inflation and interest rate challenges

Exporter confidence has seen a significant boost, rising by nearly five points as reported by Export Development Canada's (EDC) latest biannual Trade Confidence Index (TCI).

The index climbed to 70.1 in mid-2024, up from 65.7 at the end of 2023, though it remains below the historical average of 72.7.

Ontario-based businesses scored highest at 70.9, while large businesses recorded a score of 74.4.

The transportation sector saw the largest confidence increase, rising by 7.57 points to 70.13, followed by the information and communications technology sector, which increased by 5.41 points to 70.48.

Survey results show 71 percent of respondents plan to explore new export destinations within the next two years.

Among those with international operations, 64 percent expect sales by their foreign affiliates to rise in the next six months, and 47 percent anticipate an increase in direct investments abroad in the same period.

Despite the optimism, inflation and elevated interest rates remain significant concerns. Seventy-five percent of respondents reported being affected by inflation, and 72 percent by higher interest rates.

Shipping costs (39 percent) and economic conditions (33 percent) are notable trade barriers, with 24 percent of respondents experiencing supply chain issues. These issues include supplier challenges (67 percent) and transportation hurdles like shipping and logistics (52 percent).

The survey also evaluated the impact of global elections on export activities, with 20 percent of respondents expecting the next US election to significantly impact their business.

Other elections of concern include those in the European Union (37 percent), United Kingdom (31 percent), Mexico (24 percent), and India (19 percent).

For the first time, the TCI included insights into exporters' emission reduction efforts. “We did this to deepen our understanding of where Canadian exporters are in the transition to a low-carbon economy and understand their progress against their own sustainability goals,” added Bergman.

The majority are engaged in emission reduction activities, with 66 percent reducing waste, 63 percent increasing recycling, and 51 percent reducing energy consumption. However, only 19 percent have set net zero targets, and 20 percent are measuring and 17 percent reporting greenhouse gas emissions.

Most exporters (85 percent) target the US, followed by Western Europe (34 percent) and Indo-Pacific (21 percent). The US (44 percent) and Mexico (20 percent) are top future export destinations. Top business risks identified include global economic recession (58 percent) and supply chain issues (46 percent).

Financial concerns such as cash flow maintenance (40 percent) and rising expenses (39 percent) were noted, alongside non-financial challenges like customer identification (31 percent) and resource limitations (29 percent).

Stuart Bergman, EDC's chief economist, notes, “While macroeconomic challenges persist, we're detecting a notable increase in optimism from Canadian exporters, the majority of which expect a global economic recovery from the pandemic. Additionally, many are expecting international sales to pick up later this year and are setting their sights on exporting to new markets in the short term.”

The TCI, based on a survey of over 1,500 Canadian exporters, highlights increased confidence across all regions and business sizes.