Canadian exporter confidence has risen as companies become less pessimistic about U.S. and European demand and more confident in their ability to cope with a currency close to parity with the U.S. dollar, according to a survey by the country’s trade financing agency.
Export Development Canada’s semi-annual trade confidence index rose to 72.6 from 70.7, according to a report from Ottawa today, a reading that remains below the 75.9 recorded for the same period a year ago.
Bank of Canada Governor Stephen Poloz, who left as head of EDC to take over the central bank this month, has said reviving business confidence is key to Canada’s expansion. Exports and business investment dropped in the second half of last year as European leaders grappled with a credit crisis and the U.S. faced a “fiscal cliff” of tax increases and spending cuts.
“Exporters are telling us that they feel the worst may be over in Europe, that U.S. customers are ordering more, and that they are more optimistic that world markets will turn a corner in the next six months,” said EDC chief economist Peter Hall.
Perceptions of world economic conditions improved, with the balance of opinion rising to negative 9 from negative 22, according to the report. The balance of opinion is calculated by subtracting the percentage of respondents who say conditions will worsen over the next six months from the percentage of those who say conditions will improve.
The share of companies that are “very prepared” to deal with a Canadian dollar around parity with the U.S. dollar rose to 55 percent from 46 percent six months ago, according to the survey. Another 41 percent said they are “moderately prepared” and 4 percent were “not at all prepared.” Canada’s dollar traded for about C$1.05 per U.S. dollar yesterday.
About 32 percent of companies were taking no action to cope with a strong currency, followed by 19 percent who said they were cutting costs and 8 percent who used currency hedges, the report said.
Confidence rose in five of six industries tracked in the survey, led by resources such as agriculture and forestry, which increased to 72.1 from 67.3. The extractive category, covering mining, oil and gas, fell to 69.0 from 73.2, according to the report.
The Trade Confidence Index was taken by telephone from April 15 to April 26 and gathered 760 responses. Because the survey doesn’t use a random sample, there is no margin of error reported.