Despite challenges, exporters remain optimistic about diversifying into new markets
Confidence among Canadian exporters declined by nearly six points, according to the latest Trade Confidence Index (TCI) results from Export Development Canada (EDC). The TCI now sits at one of the lowest levels in the index’s 23-year history, behind the onset of COVID-19 in 2020 and the 2008 financial crisis.
Confidence fell to an index score of 63.8 from 69 six months ago. This is the third consecutive decline in survey results, which was expressed across all regions in the country and business sizes.
“Exporters are facing persistent supply chain issues and rising inflation while having to navigate through a tough labour market,” said Stuart Bergman, Vice-President and Chief Economist at EDC. “With the ongoing war in Ukraine and signs pointing to a global economic slowdown, exporters are being challenged with uncertainties on multiple fronts.”
Close to one-third (29%) of exporters surveyed cited supply chain challenges as their top concern for growing or maintaining a business outside of Canada—with more than half (57%) saying it is impacting their production. Other key challenges facing respondents include rising business expenses (28%), global economic conditions (26%) and hiring skilled talent (25%).
Nearly one-third (31%) of survey participants indicated the ongoing Russia-Ukraine conflict is creating challenges, while more than two-thirds (74%) said rising inflation is negatively affecting their business, and more than half (51%) expressed that a global economic slowdown would negatively impact them in the next six months. On rising interest rates, 23% of exporters surveyed reported a significant negative impact on their business. Exporters who reported an increase in orders to the United States in the last six months fell from 50% in mid-2022 to 38% at year-end.
Despite these challenges, exporters said they remain optimistic about diversifying into new markets, including reaching the Asian export destinations of Japan and South Korea. The survey saw a slight increase to 38% from 34% in the spring in businesses that started exporting. The U.S. is still the top new market at 26%, followed by Brazil (12%), Australia (11%), Mexico (11%), and the United Kingdom (9%).
Other highlights:
- The top export destination continues to be the U.S., followed by the U.K., Australia, Mexico and Germany.
- 48% of businesses now expect worsening financing conditions, an increase of seven percentage points from mid-2022.
- Lower confidence was felt the most among medium-sized businesses, as opposed to large businesses during our mid-year survey. The transportation sector experienced a slight increase in confidence, while all other sectors decreased. Among regions, Quebec experienced the largest drop (7.4 index points).
- 34% of exporters and ready-to-export businesses who responded to the survey were part of a women-owned or -led business, an increase from the 29% in our mid-year survey. There was also a slight increase (11%) of an Indigenous-owned or -led business and ready to export businesses who participated in the survey, compared to 8% mid-year.
