Canadian merchandise exports will remain about flat this year as lower oil and gas prices knock a fourth of the value off energy shipments, the country’s trade financing agency says.
Export Development Canada cut its forecast for the country’s shipments abroad this year from an October prediction of a 6 percent increase, according to the semi-annual Global Export Forecast report Thursday from Ottawa. Exports rose 11 percent in 2014.
Merchandise exports will be little changed at C$492 billion ($402 billion) this year, the agency said, as energy declines overshadow gains in the automobile industry, which is being helped by a weaker currency.
“Energy exports are the big spoiler,” Peter Hall, EDC’s chief economist, said in the report. “This will overshadow double-digit export growth for six out of 12 export categories and a strong underlying expansion in volumes, especially from the U.S.”
Energy exports will drop 23 percent this year, the EDC report said, led by lower prices for oil and natural gas. West Texas Intermediate crude oil will average $61 a barrel this year, down 35 percent from 2014, while Henry Hub natural gas prices decline 28 percent to $3.10 per million British thermal units, EDC said.
Automobile shipments will rise by 13 percent this year and aerospace by 17 percent according to the report. Both industries benefit from the lower Canadian dollar, which has weakened by 10 percent in the last 12 months.
“The ingredients for increased activity this year and next are firmly in place,” for automakers, the report said.
Canada is the Group of Seven’s biggest crude exporter and the drop in benchmark prices to below $50 a barrel last year from a peak of over $100 triggered layoffs and canceled investments at companies such as Cenovus Energy Inc.
Bank of Canada Governor Stephen Poloz said this month in New York his surprise January rate cut and stronger U.S. growth should help the economy recover from the oil shock by the end of next year.
Along with the weaker currency is help from a faster expansion in the U.S., which buys three-quarters of Canada’s exports. The EDC projects U.S. growth quickening to 3.6 percent this year from 2.4 percent in 2014. Canada’s economic growth rate will be unchanged at 2.4 percent this year, according to the agency.