OTTAWA — Canadian exporters believe that international sales have hit rock bottom and few see short-term relief in the domestic market.

Concerns over the declining domestic and global economies have driven Canadian exporter confidence down to its lowest point on record, according to the semi-annual Trade Confidence Index (TCI) survey from Export Development Canada (EDC).

"Canadian exporters are clearly hurting right now thanks to a major slowdown in the U.S., a slowing global economy and a persistently high Canadian dollar," said Peter Hall, chief economist, EDC. "All of these challenges combined to take exporter confidence to the lowest point on record."

The TCI survey examines the attitudes of Canadian exporters through five main indicators: trade opportunities, export sales, domestic sales, and both domestic and global economic conditions.

The overall index declined to 66.1 from 67.4 in January of 2008, the second consecutive lowest result on record since EDC began reporting semi-annually on trade confidence in 2000.

The share of respondents indicating that the global economy would get worse soared steadily to 51 percent from 30 percent in the fall of 2007. At the same time, fewer exporters are counting on a strong domestic economy for relief. The percentage of respondents expecting domestic conditions to worsen swelled to 42 percent, up from just 32 percent 6 months ago.

That said, many think the worst is over. In this survey, just 15 percent felt that international sales would worsen, down from 25 percent last fall.

The worst may be over, but U.S. trade is still not looking
good for Canadian exporters

In line with this, respondents are surprisingly upbeat about international trade opportunities — at least non-U.S. markets. A sharp increase in pessimism in the fall 2007 survey was reversed in the spring, with 77 percent of exporters expecting opportunities to improve or remain the same.

This hint of optimism may suggest that Canadian exporters are diversifying into other markets, says EDC. The share of exporters identifying the U.S. as their top riskiest market rose dramatically in the last two surveys, to 25 percent, second only to Asia.

Furthermore, most exporters believe that the Canadian dollar will stop climbing. Those expecting a further increase shrunk to 24 percent from 50 percent a year ago.

Sixty-two percent expect the Canadian dollar to remain at current levels.

Those opinions, though, conflict with recent reports from Bay Street that the loonie will rise back up to at least $1.05 US in the New Year and possibly beyond that.

According to the survey, the top coping strategy exporters identified was simply "riding out the storm and absorbing the loss." Cost-cutting is also popular, but fewer exporters were resorting to this tactic compared to previous surveys. Those planning to pass on higher costs were in smaller companies, as their ranks fell from 27 percent to just 18 percent of respondents.

"The dollar’s impact continues to hamper Canadian exports, but we’re seeing more respondents simply acknowledge that a higher dollar is now part of the equation. And at the same time, exporters are backing away from strategies to cope with the eroding margins," said Hall.

Regionally, Western Canada posted the most optimistic score of 68 despite declining from 74 since June of 2007, followed closely by Quebec at 67, Ontario at 65 and Atlantic Canada at 63.