- Data show biggest 3-month merchandise-export gain since 2011
- Bank of Canada makes next interest-rate decision Wednesday
Black River Juice Co., a 35-year-old organic beverage maker with a devoted following in Ontario, has never been able to compete in the U.S. Until now.
The juicemaker plans to ship cherry and cranberry blends to New York for the first time as a weaker Canadian dollar -- down 17 percent in the past two years -- gives it a fighting chance against American brands from Lakewood Juice Co. and J.M. Smucker Co., according to Jessica Praskey, the company’s general manager.
“We’ve had a ton of interest in exports, and we’re in the process of working to develop that market,” Praskey said by phone from Mississauga, a Toronto suburb. She predicts U.S. sales for the company, purchased by Ontario Natural Food Co-op in 2013, may grow to C$600,000 ($450,000) within 18 months. “Typically we wouldn’t be competitive on price on anything in the U.S., but we are now.”
Praskey’s story highlights a developing trend. Government data through January show merchandise exports have increased 7.3 percent in volume terms over the past three months, the biggest gain since 2011 and the second-biggest since the 2008-09 recession. Double-digit advances in industries sensitive to exchange rates and U.S. demand are leading the way. That includes production of chemical and forestry goods and automobiles, along with the manufacture of consumer goods, such as Black River’s juice.
Although the category accounts for only a tiny proportion of total exports, Statistics Canada reported shipments of fresh, frozen and canned fruit and vegetable juices and frozen fruit generated about C$500 million in export sales last year, 20 percent above 2014 levels.
The export gains are a welcome development for Canada’s central bank, which has long predicted non-energy manufacturing would help restore the economy to full capacity. The forecast may finally be materializing.
“We are predicting the second half of the year will be better than the first half of the year, and that’s just a function of the export economy kicking in, Canada benefiting from a stronger U.S. economy and obviously the benefit of a lower Canadian dollar,” Bank of Nova Scotia Chief Executive Officer Brian Porter said in a March 1 interview with Pamela Ritchie on Bloomberg TV Canada.
Governor Stephen Poloz, whose next interest-rate decision is Wednesday, cut the benchmark rate twice last year as plummeting oil prices produced a first-half economic contraction. If the export trend fizzles, he may cut again. Swaps trading implies there’s a one-in-three chance of a reduction by the bank’s December meeting.
In fact, some investors remain unconvinced the currency mechanism is working. The latest trading in overnight index swaps showed about a 30 percent probability of more rate cuts this year from Poloz. Seven of 19 economists in a Bloomberg survey last week predict the central bank will lower borrowing costs at some point in 2016. None forecast a rate cut on Wednesday.
“There are some tentative signs that a weaker currency has helped export
markets,” said Ben Homsy, associate portfolio manager at Leith Wheeler Investment Counsel Ltd. in Vancouver, which manages C$16 billion in assets. “We would have expected to see more of an impact so far on non-energy exports than we have.”
Still, the impact of the currency’s decline to about 75 U.S. cents, from parity in early 2013, is undeniable.
In January, exports of electronic products rose 8 percent from a year earlier, forest products were up 12 percent, car sales increased 38 percent and consumer goods 41 percent. Personal transportation equipment such as boats recorded a 45 percent gain.
That’s enough for Gilles Theriault to bet the low dollar and a U.S. recovery will bring new orders for fishing boats to his Meteghan River, Nova Scotia yard. “It definitely changes things around when it comes to the fishing industry,” he said.
A.F. Theriault & Son Ltd., a family-owned ship builder with about 165 employees, is already busy working on domestic orders for passenger and car ferries, Theriault said. He added he’s looking to hire skilled trades-people, many of whom are returning to the east coast after losing jobs in Alberta’s oil patch, on the expectation of a bump in business.
“We still don’t have quite enough people for the work we have,” he said by telephone. “So we’ll be hiring some more and we have been hiring some more in the last two months.”