23 May 2008

Prairie exports buck the trend

The following article is written by Peter G. Hall, Vice-President and Deputy Chief Economist, Export Development Canada.

Canada’s exports are in recession this year, putting a tight squeeze on the economy. But not all exporters are sharing the pain. While many are seeing double-digit declines in orders, certain others can barely keep up with demand. These contrasts have a strong regional slant that has led to a quick role reversal, turning “have” provinces into have-not’s, and vice versa. Will it last?

The provincial contrasts are striking. Weighed down by the high Canadian dollar and weakening US demand, Ontario and Quebec will see exports tumble 7% and 4.5% this year, respectively. British Columbia, already in decline in the last two years, will see a further 3% drop this year. Three other provinces will hug the zero-line. Swing to the Prairies, and the story is very different. Manitoba and Alberta exports will jump by 6% this year, and Saskatchewan will see a whopping

13% gain. New Brunswick will join the party, rising 6% this year and a red-hot 20% in 2009….

These days, it’s also about who is buying. With the US economy leading the global slowdown, exporters in provinces that are more highly exposed to the US market–like Quebec and Ontario–are seeing a lot of red ink. And this year, selling into other developed markets will not prove much of an antidote.

Collectively, industrialized economies will see economic growth slow from 2.6% in 2007 to just 1.6% this year, not much different than US performance. …

Ontario is the province least diversified into emerging markets, shipping just 4.9% of its goods there in 2007. Many provinces are at the national average of 8%. The top two are Saskatchewan, at 25.3%, and Manitoba, at 14.5% of total goods shipped. In this light, it’s hardly surprising that among the provinces, these two top the export growth rankings this year.

Will this turning of the provincial growth tables persist? The boom in the Prairies will not fade fast. Energy prices are forecast to fall to more reasonable levels later this year, but strong investment will, on balance, ensure higher export volumes. Prices for wheat and other coarse grains will continue to rise as global food supplies remain stretched, ensuring strong export activity. Fertilizer shipments, another key growth source, will continue to expand as food shortages bring more marginal arable land into production worldwide.

The bottom line? The shift in global demand to certain key products and markets has crea