EDC says US recovery to power next global cycle

Good news for Canadian companies that will experience an immediate boon.

October 28, 2014   by PLANT STAFF

The global economy is revving up, which is good for Canadian exports.

The global economy is revving up, which is good for Canadian exports.

TORONTO — The momentum of the US recovery will be the key driver of the next global growth cycle, says a new global economic forecast by Export Development Canada (EDC).

The Crown agency that provides financing and insurance to exporters notes US consumers and businesses “are back” and this is already translating into solid Canadian export growth.

“Others aren’t far behind,” says Peter Hall, EDC’s chief economist. “US growth will translate into higher activity in other OECD economies and in emerging markets.

He says the US is well-positioned to power up economies that are in gear.

“It’s all happening quickly, so for Canadian companies active in trade, or even considering it, it’s crucial for them to ensure they’re in gear too.”

EDC’s forecast for the US economy is overall growth of 3.6% in 2015, which is higher than most forecasts. The outlook notes positive movements in consumer and corporate confidence as a key signal that pent-up demand in the US economy will continue driving growth forward.

“For the first time in five years, confidence has staged a solid return to levels consistent with sustained economic growth,” says Hall. “In just over a year, indexes of both consumer and business confidence have moved from recessionary levels into the ‘normal’ zone.”

The US economy and a lower Canadian dollar are paying dividends to Canadian exporters. Real merchandise exports are on an eight-month surge, and are currently up 12% year-on-year.

The Eurozone importing from Canada at a respectable rate, despite recent “macro-economic” weakness, bolstered this strong performance. The EDC forecasts Canadian export growth to reach 11% this year and 6% in 2015.

The EDC notes export growth spans a wide variety of Canadian industries and extends across almost every province, and is expected to be a boost to trade-related business investment, despite the expectation of persistent weakness in commodity prices. As a result, tightening industrial capacity will lead to significant expansion decisions.

In spite of weaker domestic performance, Canada’s GDP growth is forecast to accelerate to 2.8% next year, largely thanks to trade.

“Add it all up, and it comes to 4% global growth in 2015, up from 3.2% this year. It’s good news for Canadian companies, but it doesn’t guarantee growth; that depends on a lot of additional factors,” added Hall.

But he notes good news. He says recent weakness of the Canadian dollar is likely to persist.

EDC’s forecast calls for the Canadian dollar to hover in the low 90-cent US level for the next two years.

Click here for a copy of the report.

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