Export Development Canada has slashed its forecast of goods exports this year to 2 per cent, down from a previous estimate of 7 per cent.
While natural resources continue to struggle under lower prices and sluggish demand, double-digit growth in consumer goods, automotive, and aerospace sec– tors will drive Canada’s overall exports to grow by two per cent this year, according to a new global export forecast by EDC.
Export Development Canada Forecast: 2016 and 2017
A cluster of Canadian sectors is likely to do very well this year, including autos, consumer goods, aerospace, and machinery-and-equipment, according to a twice-yearly forecast by EDC, the federal government’s export lender.
But that strength is being offset by a commodities price collapse that is proving to be unexpectedly deep and prolonged, EDC chief economist Peter Hall said.
He insisted that the export recovery is coming, but it’s been delayed. EDC is calling for 6-per-cent export growth in 2017.
Export Outlook
The EDC’s weaker export outlook is in line with that of Bank of Canada Governor Stephen Poloz, who is also cautious about the year ahead. Poloz has been warning that a long list of obstacles could derail Canada’s economic prospects, including a downturn in the global economy, weak business investment and a recent rebound in the Canadian dollar.
Canada’s economy continues to show evidence of a split personality.
On the up side, Hall pointed to strong expected gains this year in exports of autos (up 10 per cent), forestry (up 5 per cent), aerospace (up 13 per cent) and consumer goods (up 14 per cent). All of these sectors are getting a lift from the lower value of the Canadian dollar.
Highlights
• GDP growth (Canada): 1.4 per cent this year and 2.3 per cent in 2017.
• GDP growth (U.S.): 2 per cent this year and 2.7 per cent in 2017.
• GDP growth (global): 3.1 per cent this year and 3.5 per cent in 2017.
• Canadian dollar: 75 cent (U.S.) this year and 77 cents in 2017.
• Exports to the United States: Up 1 per cent this year and 7 per cent in 2017.
• Exports to Europe: Up 3 per cent this year and 5 per cent in 2017
• Exports to Asia: Up 2 per cent this year and 3 per cent in 2017.
Forestry
In the near term EDC Economics believes that the relative weakness of the loonie against the US dollar, US demand growth and stronger prices will result in 5 per cent growth of Canadian forestry exports in 2016 and 6 per cent growth in 2017.
EDC Economics forecasts that this will continue, with housing starts reaching just over 1.2 million units in 2016 and nearly 1.4 million units in 2017. This will sustain the strong demand for lumber and wood paneling for construction and consumer use in the US.
EDC Economics forecasts that this supply constraint will result in higher prices for Canadian lumber over the medium term, resulting in the total value of lumber exports increasing even as export volume levels diminish.