Majority of Canada’s Exporters See Global Recession, EDC Finds

(Bloomberg) -- Canadian exporters are reporting widespread concerns about a global recession, with sentiment in the sector falling to the lowest level in seven years, according to a survey by the country’s export financing agency.

Export Development Canada’s trade confidence index, a composite gauge based on a bi-annual survey of 1,000 businesses, dropped to 69.8, compared with 73.7 at the end of last year. It’s the lowest reading since 2011 and the second lowest since the last recession a decade ago.

Escalating concern over protectionism is hurting confidence, with only 8% of respondents expecting trade tensions to ease over the next year. About a third of respondents predict a global recession by next year and just over 50% see one by 2021.

“Disruptive international trade policies have clearly shaken the confidence of Canadian exporters,” Peter Hall, chief economist at EDC, said in a statement. “One third of respondents are already negatively impacted by protectionist measures now in place, and an overwhelming majority sees no resolution of major global trade issues within the next year.”

It was the first time the survey asked about the likelihood of a recession.

The survey results represent a major red flag for the Canadian economy. With consumer spending expected to enter a prolonged slowdown, the economy’s ability to recover from its recent soft patch will depend in large part on exports and business investment.

And while there have been some indications of improvement in recent months, a lack of business optimism suggests any momentum could be short-lived.

There was across-the-board deterioration in the survey results, with scores on all the five questions showing deterioration.

The share of respondents expecting exports to increase over the next six months dropped to 55%, from 64% percent previously, as orders from the U.S. soften. The share of companies saying they plan to increase investment and hire new workers was also down. The slump in confidence was also country-wide, with only companies in Atlantic Canada reporting stronger confidence levels.

The survey was taken from March 19 to April 15, before U.S. President Donald Trump lifted steel and aluminum tariffs on Canada, a move that’s expected to help clear a path for the ratification of the new North American trade deal.

Ratification uncertainty “appears to be causing an investment hesitation among some Canadian exporters,” Hall said.

Ironically, the completion of the new North American free trade agreement seems to have reduced the urgency to diversify into new markets, the survey showed.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Chris Fournier, Stephen Wicary

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