For years, economists have been saying that if Canada wants sustainable growth, it has to stop relying on consumers taking on more debt and start being an export economy again.
The problem was that, until now, it didn’t seem that was happening quickly enough, and that posed a real risk to Canada’s economy going forward.
But StatsCan’s latest GDP report shows exports last year grew a strong 5.4 per cent in 2014. According to Bank of Montreal economist Benjamin Reitzes, exporters made their largest contribution to Canadian economic growth since 1999.
Reitzes published this chart showing exports being a drag on economic growth for the past decade or more, with that finally turning around last year.
“Look for that trend to continue in 2015 as a weaker dollar and firming U.S. growth help,” Reitzes wrote.
The last time Canada’s exports were this positive, the loonie was trading below 80 cents U.S. and oil prices hovered around $30. In other words, economic conditions were similar to what we see today.
So it may be that the “great rotation” to exports that economists were predicting (hoping for?) may actually be on its way.
Reitzes cautions that not everything is coming up roses: Business investment is “expected to fall heavily” in the early months of this year, thanks to low oil prices, and that will be a drag on the economy.
Consumers, who’ve pretty much maxed out their credit, will likely slow spending this year, Reitzes writes, and the housing market is “expected to slow” as well.
And as CIBC noted in a recent report, Canada’s ability to export has been hobbled by years of factory shutdowns. We simply no longer have as much to export as we used to, and at least in the short term that limits Canada’s ability to take advantage of the lower loonie.
But if nothing else, Canada’s solid export growth last year shows investors, business leaders and consumers that, yes, there is life after oil.
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