Fall 2017 Trade Confidence Index:
Taking a More Critical Look at the Next Six Months
The Fall 2017 Trade Confidence Index (TCI) was released on December 15. And as winter approaches, businesses are feeling a little colder towards exporting.
The TCI is a pulse check of Canadian exporters’ confidence in domestic and international sales opportunities over the next six months. Despite the unexpected display of confidence this spring, it seems that worldwide uncertainty may have caught up with Canadian businesses as the year comes to a close. Here are some highlights from the report.
Trade confidence at a glance
Exporters’ confidence in their sales is decreasing.
Domestic economic conditions
Some of exporters’ fastest-rising concerns are:
On the bright side:
Exporters are more confident about future international opportunities.
World economic conditions
International business opportunities
Exporters are feeling increasingly optimistic about:
Which companies are most concerned?
Small and large businesses are feeling the pressure — but medium-sized businesses remain upbeat.
Small business TCI
Medium business TCI
Large business TCI
All regions experienced a decline in confidence, with the biggest being a drop of 2.7 points in the Atlantic.
Information and Communications Technology and Infrastructure and Environment were the only sectors to experience a TCI increase since Spring 2017.
The factors behind the drop
This season’s TCI drop isn’t unexpected — with so much uncertainty throughout 2017, it’s hard to imagine that businesses wouldn’t be affected.
Here are some changes Canadians are watching out for:
The impact of NAFTA
Canada, the U.S. and Mexico have a deeply intertwined trade relationship thanks to NAFTA. With the Agreement being renegotiated, many Canadian businesses are feeling more cautious about North American trade.
Canadian businesses feeling negatively impacted by NAFTA negotiations
Of that 23%, Canadian companies’ indicated the following responses to NAFTA renegotiations
Top markets for companies planning to diversify
Preparing for CETA
With CETA in force as of September 21, Canadian exporters now have better access to a high-opportunity market with 500 million potential customers — but are they acting on it?
Businesses developing new products, services or production processes for Europe
Businesses increasing production to expand existing export volumes to Europe
Canadian business paying more attention to the European market
Although it’s been an exciting year for Canada’s Free Trade Agreements, 56% of exporters indicated that FTAs have no effect on their exporting strategy.
Exploring the global economy/Diversifying markets
Other than the U.S., Canadian businesses’ activity in current market destinations decreased slightly.
Top 5 challenges exporters face in China
Exporters who started exporting to new countries in the last two years
Key markets of the last two years:
Exporters who plan to export to new countries in the next two years
Key markets for the next two years:
The Canadian economy
Between the current Canadian dollar and increasing interest rates, many businesses are feeling strain from the economy.
The number of exporters who believe they will benefit from the current value of the Canadian dollar has decreased since Spring 2017
On top of the low dollar, increased interest rates are impacting Canadian exporters.
Exporters who indicate that higher interest rates negatively impact their exports
Exporters impacted who say that high interest rates cost them more and lower their profit margins
Exporters negatively impacted who are not planning to adapt to new interest rates
An increased proportion of exporting companies believe that the terms and conditions for obtaining financing will worsen
At-home growth has also dampened somewhat since Spring 2017.
A smaller proportion of exporting companies indicated they plan to increase hiring in the next 6 months
A larger proportion of exporters indicated that getting access to skilled labour will be very difficult
Looking to the future
Exporters’ confidence may have dropped slightly, but it’s not all bad news. Canadian businesses have a lot to feel optimistic about.
International investments are holding steady, with
of companies investing or planning to invest outside Canada.
Of companies investing:
established new branches
built new warehouses
acquired a foreign company
And even at home, where exporters are the most uneasy, companies have good reasons to believe they’ll continue to find success in the coming months:
developed new products
experienced growing demand for their products
have forecasted domestic sales growth
If Canadians exporters’ drop in confidence seems worrisome, keep this in mind:
The surge of confidence in the Spring 2017 TCI was unexpected, and despite uncertain political and environmental climates, today’s TCI is still 1.2 points higher than this time last year.
Over the years, we’ve witnessed—and survived—much greater TCI drops. So, while it’s smart to stay cautious, now isn’t the time to hold back on finding new international opportunities for your business.
About the Trade Confidence Index
Conducted twice a year since 1999, our Trade Confidence Index (TCI) is a pulse check of Canadian exporters’ level of confidence and their expectations of international trade opportunities over the next six months. It is a composite score based on responses to questions regarding five elements: export sales, international business opportunities, world economic conditions, domestic sales, and domestic economic conditions.