Challenges aside, Canadian exporters hold bright view of 2022
t’s nice to wind down 2021 with a bit of good news: Export Development Canada’s year-end Trade Confidence Index (TCI) has moderated slightly from the eye-popping heights of our spring survey results. In a nutshell, it discovered that despite all the challenges that continue to swirl around global trade, prospects for a continued resurgence in activity remain firm, in the eyes of Canadian exporters. Having said that, it’s far from a perfect report; growth prospects may be there, but the survey identifies key barriers that may prevent exporters from realizing those gains. What are the key messages?
The Trade Confidence Index is made up of five key elements, and for the most part, they tend to swing in the same direction. Not this time: On both domestic and international fronts, sales prospects are booming, growing well beyond the stellar mid-year showing. At the same time, respondents soured significantly on near-term world and domestic economic conditions—as if to say, we don’t like the upcoming sales environment, but we’re going to be able to sell into it anyway. And that may be because the fifth TCI element, international business opportunities, held the line at our mid-year survey levels.
The results may seem counterintuitive, but make a lot more sense when combined with more detailed observations from the survey. Labour issues were cited as a key barrier to growth. Activity levels are spurring hiring intentions to the highest levels since at least 2012, no surprise given recent Canadian labour data. At the same time, the difficulty of hiring skilled labour has also soared past previous norms, with 44% of respondents reporting it to be “very difficult.” The orders may be flooding in, but the ability to keep pace may well be stunted by the chronic lack of skilled workers—for which there’s no quick fix.
Travel is another critical issue. In EDC’s countrywide events with senior leaders, this has surfaced again as a major pain point. Companies have been able to ride on their reputation and relationships, but know they can only push this so far. New business requires prospecting at sales shows, networking events, interfacing with suppliers and so on—all of which require a resumption of travel. The top challenge identified by respondents in the TCI survey was connecting with customers. That’s scary, but it’s getting better—although close to one-third of those surveyed were troubled by travel, which is five percentage points less than in our June survey. This may be one of the more fixable barriers to business.
Stuck in the middle of these two issues is supply chain constraints. This came in as a close second in the rankings and could be seen in the responses to multiple questions on current barriers to business. The survey says little about the timing of this constraint, but given how views of business conditions soured, we can guess that respondents expect supply chain woes to persist over the coming six months.
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As businesses continue to navigate their way through the pandemic, in our year-end 2021 TCI, the outlook according to Canadian exporters remains positive, but has moderated slightly since our June survey. Discover the highlights of this important survey, including the top markets of interest for companies planning to expand overseas.
COVID-19 continues to weigh on the overall picture. A clear majority of respondents still believes that the pandemic is having a negative impact on their sales. However, the number has consistently slid back from the 65% registered this time last year to 58% now. Even so, a large majority of respondents also reports that they’re struggling to rise back to pre-pandemic levels of activity, with just 36% claiming that current production is either at or ahead of early-2020 levels.
Are Canadian exporters just giving in? Hardly. In the face of current adversity, a record number of respondents plan to export to new countries. Seems Canadians aren’t wasting a good crisis, but in the face of elevated risks are venturing out into the broader world of exporting. At 78%, the number planning to export to new countries has never been higher. And with all the talk of near-shoring and so forth, respondents are planning investments outside of Canada in impressive numbers. Typically, 10-15% of respondents are planning investments abroad; this has jumped to the 25% level over the past three surveys.
The bottom line?
Trade confidence has multiple reasons to be low, but it’s currently defying the odds. Our survey reveals that sales will be strong in spite of the conditions that threaten near-term growth: Labour constraints, supply chain blockages and limited personal interactions. Underneath it, there’s a resilient, can-do attitude striving to ride above the challenges, or to come up with new and creative solutions to do so. Either way, the upbeat results are inspiring, and a great way to close off the year.
With that, I’d like to wish you all the happiest of holidays, a very Merry Christmas, and best wishes for a happy, healthy and prosperous New Year!
Learn more here: https://www.edc.ca/en/weekly-commentary/trade-confidence-powers-on.html