A quarter of Trade Confidence Index respondents experience supply chain issues

Exporter confidence has increased by nearly five points, according to Export Development Canada (EDC)’s latest biannual Trade Confidence Index (TCI). The TCI rose to 70.1 index points in mid-year 2024, up from 65.7 points at the end of 2023. However, it still sits below the historical average of 72.7.

“While macroeconomic challenges persist, we’re detecting a notable increase in optimism from Canadian exporters, the majority of which expect a global economic recovery from the pandemic,” says Stuart Bergman, EDC’s chief economist. “Additionally, many are expecting international sales to pick up later this year and are setting their sights on exporting to new markets in the short term.”

Despite the rise in trade confidence, most respondents reported that inflation and elevated interest rates continue to negatively impact their business. Three-quarters of survey respondents reported being impacted by inflation and 72 per cent by higher interest rates. When it comes to trade barriers, on top are shipping costs experienced by 39 per cent of respondents and economic conditions experienced by one-third. About one-quarter of respondents also reported experiencing supply chain issues. Top supply chain issues included supplier challenges, faced by 67 per cent of respondents, and transportation hurdles such as shipping and logistics, faced by 52 per cent of respondents.

The TCI, which surveyed more than 1,500 Canadian exporters this round, revealed that exporter confidence has increased across all regions and all business sizes. Ontario-based businesses reported the highest confidence with an index score of 70.9 and large businesses reported the highest confidence with a score of 74.4. With an increase of 7.57 index points, businesses in the transportation sector experienced the largest jump (to 70.13 points), followed by those in the information and communications technology sector, which saw an increase of 5.41 index points (to 70.48 points).

Survey results show that 71 per cent of respondents plan on exporting to new destinations in the next two years. Moreover, for those with operations abroad, two-thirds of respondents (64 per cent) expect sales by their foreign affiliates to increase in the next six months and 47 per cent expect their direct investments abroad to increase in the next six months.

The mid-year survey also assessed exporters’ views on the impact of global elections on their business and export activities. Results show 20 per cent of respondents expect the next U.S. election to have a significant impact on their business. Other top-of-mind elections include the European Union (37 per cent), United Kingdom (31 per cent), Mexico (24 per cent) and India (19 per cent).

For the first time since EDC launched the survey in 1999, the TCI includes insights into exporters’ emission reduction activities.

“We did this to deepen our understanding of where Canadian exporters are in the transition to a low carbon economy and understand their progress against their own sustainability goals,” adds Bergman.

Results reveal that the majority of respondents are undertaking some form of emission reduction activities. More than half (66 per cent) reported reducing waste, increasing recycling (63 per cent) and reducing energy consumption (51 per cent). Less than a quarter (19 per cent) reported setting net zero targets, and 20 per cent are measuring and 17 per cent reporting greenhouse gas (GHG) emissions.

Other findings:

• Of the current sample of exporters, a majority export to the U.S. (85 per cent), followed by countries in Western Europe (34 per cent) and Indo-Pacific (21 per cent). The U.S. (44 per cent) and Mexico (20 per cent) are top countries that businesses are planning to export to.
• More than half of respondents (58 per cent) identified global economic recession and 46 per cent identified supply chain issues as top risks to their business.
• Survey respondents also noted key financial issues, such as cash flow maintenance (40 per cent) and rising expenses (39 per cent), and non-financial challenges, such as identifying and connecting with customers (31 per cent) and limitations related to time and resources (29 per cent).