Disappointing Canadian exports will lift next year

The economy has been slacking this year and exports are a big reason why, says RBC Economics in a new research note.

“Canadian exports have substantially underperformed growth relative to recoveries from the last two recessions in the 1980s and the 1990s,” says the bank.

Canada’s real GDP growth was 1.7% last year, down from 2.5% in 2011, and the bank projects it will be 1.8% this year.

Read: Strengthen exports to developing economies, says BoC

Export growth has dropped from 4.7% in 2011 to 1.5% last year, with this year expected to come in at 2%, says the research report.

Struggling sectors include energy resources and autos. Both are hurting as U.S. supplies take care of that country’s domestic needs, lowering demand for Canadian products, says the bank.

Read: Slow times for oilpatch deals

But nearly all export categories are underperforming, with only farming, fishing and mineral products matching their past growth.

Lower productivity levels and higher wages are two factors affecting Canada’s overall export levels. Canada’s strong dollar is also an issue.

The aging population, at home and abroad, is also contributing to the disappointing export levels, as older people consume fewer goods.

Despite these factors, the bank predicts that export growth will pick up in 2014. Labour costs won’t increase substantially going forward, the dollar will weaken and the U.S. economy will pick up, boosting Canada’s export fortunes.

Read: Don’t discount the U.S. economy

Staff

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