For all the pre-crisis talk about resource scarcity, the rarest commodity since crisis hit is confidence. But now, it's the comeback kid of the global economy: the long hibernation is over, and across a number of heavy-hitting economies, confidence is normalizing. Thankfully, Canadian exporters seem to agree. Export Development Canada's Fall 2013 Trade Confidence Index rose again, the first back-to-back increase in the Index in three years. Are things looking up?
It seems so. The recent increase was more rapid than in the Spring survey, and lifted trade confidence to a level higher than the average recorded in the 2003-07 global boom years. Higher levels than the current reading of 75.4 have been recorded in the post-crisis period, but they were not stable; beyond the period of most intense global stimulus, the readings have been unusually volatile. These last two upward movements in the index are the most stable pattern we have seen in years.
Key to the jump in the Fall result is the about-face on perceptions of global economic conditions. For the first time since early 2011, the share of respondents expecting improved conditions exceeded those foreseeing a deterioration. Canadian exporters believe they will get a piece of the action. A growing majority - 55 per cent - believe that export sales will increase in the next six months, the strongest showing among the five Index elements. Only 8 per cent expect slower sales.
At the same time, exporters are a lot more upbeat about international business opportunities. Over one-third of respondents now see improved near-term opportunities, up from just over a quarter of the sample in the Spring survey. It seems that US activity is driving this: 40 per cent of exporters saw an increase in US orders over the past 6 months, up from 35 per cent in the Spring. But it's not just a US story; building on a decade-long trend, half of respondents say that they plan to expand sales into new countries over the coming two years. That's up from the one-third of respondents who expanded sales into new markets in the past two years. Diversification of exports appears to be alive and well.
Among industries, the increase in optimism was greatest in the mining-oil and gas sector. The Fall 2013 result was a rebound from a very low Spring reading that was likely related to lower global metal prices, oil and gas transportation bottlenecks and the related compression in prices for Canadian oil. While prices remain suppressed, transportation constraints are not as severe as they appeared in the Spring. The other big gainer was the transportation sector - strange given the supply issues constraining auto and auto parts exports. However, it may well reflect the much brighter prospects for Canada's aerospace sector. Light manufacturing also posted a decent gain, while the agri-food and forestry sectors combined were the only industry grouping to post a drop in confidence.
Trade confidence was up all across the country. The West showed the greatest gains in the Fall survey, with Ontario hard on its heels. The smallest increase in Confidence was in Atlantic Canada.
As world growth gains momentum, it is good to see a parallel increase in Canadian exporter optimism. With our domestic economy showing signs of weakness, the economy will need a vibrant trade sector to keep things going. For the moment, exporters are suggesting this will happen.
The bottom line? There is considerable hand-wringing that the rotation of growth from sales inside our borders to external sales is just a pipe dream. For assurance, just ask the exporters themselves. They are the ones with most at stake in the game, and their feel-good factor just got a decent boost.