TRANSBORDER TRENDS SPECIAL: Turnaround expected for Quebec exports

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MONTREAL, QUE — Quebec transborder carriers, hurt by two years of traffic volume declines, can look forward to a rebound in exports this year and next, according to a provincial export outlook by Export Development Canada (EDC).

Quebec exports are poised to rebound by nine per cent and five per cent this year and next, according to EDCsenior vice-president and chief economist Stephen Poloz.

Carriers hauling industrial goods exports and forestry products to the U.S., in particular, should see gains.

"A strong global economic outlook coupled with broad based improvements in the U.S. economy is good news particularly for Quebec exporters as their performance has always been dictated by the dynamics of the American economy," says Poloz.

Poloz outlined his forecast at a recent luncheon hosted by the World Trade Centre Montreal, a service branch of the Board of Trade of Metropolitan Montreal.

The province’s important industrial goods exports are projected to recover strongly, rising by 14 per cent this year. The general recovery in global manufacturing is fuelling demand for factory inputs as well as increases in commodity prices. The overall combined effect of both increases in demand and prices are behind the strong performance this year. However, commodity prices are expected to revert toward their long-term averages in 2005 and export growth for industrial goods will follow suit with a deceleration to three per cent next year.

Forestry exports are also anticipated to perform as well as their industrial counterparts, growing by 15 per cent in 2004 and another nine per cent next year. Much of the growth is a result of higher newsprint prices projected throughout the forecast period. Export growth next year, however, will be tempered by declining U.S. construction activity and softer timber prices.

Ninety-one per cent of Quebec’s exports of transportation equipment are aerospace products. As a result, the expected recovery in transportation exports in 2004-2005 is tied to the performance of the important regional jet market. In fact, Bombardier Regional Jets (RJs) weathered the post 9/11 downturn in the airline industry very well, making Quebec the only province to have recorded positive growth in aerospace exports in 2003. As demand for RJs is projected to continue to recover throughout the forecast period, transportation exports will also grow in kind, rising six and seven per cent respectively this year and next.

A modest turnaround is forecast for machinery and equipment (M&E) demand with exports rising by three per cent this year and another four per cent in 2005, following a contraction of almost 11 per cent last year. A global rebound in business investment (particularly in IT equipment), low interest rates, rising corporate profits and higher energy prices are all expected to contribute to the recovery in the sector.

Quebec’s smaller consumer goods and agri-food industries are projected to round out the positive export outlook with growth for consumer goods exports rising to two per cent and one per cent in 2004-2005, and four per cent and seven per cent for the latter. Low interest rates, rising disposable incomes and gradually improving labour markets in the U.S. all bode well for both industries.

Quebec merchandise exports were just over $61 billion in 2003 and are expected to rise to $66.5 billion in 2004 and to $69.9 billion next year. The industrial goods sector represents the largest export sector at 26.8 per cent or $16.3 billion, followed by the forestry sector at 18.1 per cent or $11.1 billion, the transportation industry at 17.7 per cent or $10.8 billion and machinery and equipment at 14.5 per cent or $8.9 billion.

Nationally, the Canadian economy is expected to grow by three per cent in 2004 and by 3.3 per cent in 2005. Export sales should increase by six per cent in 2004 and by two per cent in 2005.

A copy of EDC’s semi-annual Global Export Forecast is available on EDC’s web-site:

EDC provides trade finance and risk management services to Canadian exporters and investors in up to 200 markets. Founded in 1944, EDC is a crown corporation that operates as a commercial financial institution.

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