Canadian exports to increase 7% in 2016: EDC forecast

A strengthening American economy and an anticipated increase in the price of oil will drive significant growth in...

A strengthening American economy and an anticipated increase in the price of oil will drive significant growth in Canadian exports in 2016, according to an Export Development Canada outlook report released November 3.

A 9% increase in shipments to the United States will be the major factor behind an overall increase of 7%. This follows a 1% drop in total exports this year due to the slump in oil prices.

“The U.S. economy is being led by increased consumer spending and a rising housing market that can sustain higher growth for at least the next two years,” said EDC chief economist Peter Hall.

“On top of this, U.S. companies now have very tight capacity constraints, which is really good news for Canadian businesses, many of which enjoy a significant price advantage when selling to the U.S. due to the lower Canadian dollar.”

The U.S. economy will grow 2.5% this year, EDC forecasts, and a further 2.9% in 2016. By comparison, the organization expects Canadian GDP to increase only 1.3% in 2015 and 2.3% in 2016.

Although sales to the U.S. will be the biggest factor driving Canadian export growth in 2016, sales to Western Europe and China are also expected to increase, by 8% and 4%, respectively.

"Canada is in a unique position among global exporters as it will soon be the only major economy with preferential access across both the Atlantic and Pacific Oceans, thanks to the Comprehensive Economic and Trade Agreement with the European Union and the Trans-Pacific Partnership," Hall said.

"This will make Canada the gateway economy for North America, and Canadian businesses should start preparing now for the opportunities this will create."

China presents a growing opportunity for Canadian companies, the forecast said.

"Emerging markets, including China, account for more than 10% of Canadian exports, and more than 20% in provinces such as British Columbia, Saskatchewan and Manitoba," Hall said.

The energy sector was the only area in Canada that saw declines in 2015 due to the low price of oil. Energy exports, which make up 24% of Canada’s total exports, are expected to fall 31% this year, but this will turn around in 2016. EDC expects growth of 17% next year in this sector.

“Lower prices for energy mean that provinces which rely heavily on the sector, such as Alberta and Newfoundland and Labrador, have seen a significant drop in the value of their exports this year,” the organization said in a press release. “Provinces with more diversified economies, such as Ontario and Quebec, are enjoying export growth of 10% or more.

“EDC forecasts that all provinces will have increased exports in 2016, led by Alberta at 15% and Newfoundland and Labrador at 11% as energy exports improve.”

Other sectors expected to see significant export growth in 2016 include aircraft and parts, forecast to increase 17%, and chemical and plastics (7%).

ecrawford@biv.com

@EmmaHampelBIV