OTTAWA – A new forecast from the federal export agency predicts Canada’s economy is on the threshold of stronger growth thanks to a long-awaited recovery in the export sector.
Export Development Canada says renewed strength in the United States and in emerging markets, along with a lower loonie, will trigger a rebound in the lagging export sector, particularly in automobiles, building materials and appliances.
EDC chief economist Peter Hall says the volume of shipments will likely start taking off in the second half of this year and expand to 5.8 per cent growth in 2015.
Hall says the pickup in exports might have happened sooner but for the U.S. government shutdown in October and the unusually harsh weather throughout the winter, which accounts for the EDC’s expectation of a modest 2.5 per cent growth in exports this year.
Hall said going forward, global and U.S. demand will be there, adding that his major worry is whether Canadian exporters and manufactures have the capacity to ramp up production and shipments.
Exports and the manufacturing sector remain the only significant segments of the Canadian economy that still have not fully recovered from the recession.
“The labour capacity is there and, when we looked at past investment cycles, we realized that the Canadian economy can actually sustain six per cent real export growth in 2015,” Hall said.
Bank of Canada governor Stephen Poloz has said an export rebound is essential for sustained, self-generating “natural growth” because the domestic economy, particularly housing, has run its course.
Poloz said last week he also believes a rotation to exports is just around the corner, although he noted that the right conditions had been in place for some time and the rebound had yet to occur.
Hall said the biggest reason to be encouraged is that the U.S. economy in kicking into gear for the first time since the recession, adding that he expects American growth will average three per cent this year and four per cent next.
The Canadian dollar, which has lost about 10 per cent of its value against the U.S. greenback in the past year, will also help exporters. The EDC calculates the lower loonie could add as much as half a point to gross domestic product growth this year.
There is a lag in the effect a lower dollar has on exports, “but the sense we’re getting from exporters is that they are already feeling they can lower their prices and be more competitive in the global marketplace,” Hall said, noting that the most recent economic data support his rosy export outlook.
According to Statistics Canada, manufacturers had one of the biggest months in years in February, with sales rising 1.4 per cent, while exports jumped 3.6 per cent in February, producing only the third monthly trade surplus for Canada in more than two years.