A low Canadian dollar and surging U.S. economy will drive growth in Ontario’s key export sectors for the rest of this year and into 2015, according to the latest forecast by Export Development Canada.
Shipments of industrial machinery, chemicals and plastics, in particular, are set to rise as demand in the world’s biggest economy — finally — gets back on solid footing, a prediction that has been at least two years in coming.
“The prime difference this time is that there actually is sustained, real recovery-style growth happening and it’s starting with our Number 1 customer south of the border,” said Peter Hall, chief economist with Export Development Canada, known as EDC.
“The U.S. is back, and that’s been very beneficial for Ontario exports this year. The better news is that we believe this is just a taste of what’s to come.”
The latest figures from the U.S. government show that the country’s economy expanded by a vigorous 3.5 per cent annual rate in the third quarter.
The strong growth forecast comes as welcome news, as Canadian consumers remain weighed down by household debt and provincial governments across the country focus on balancing their books, Hall said.
“It really is up to exports and export-related business investment to carry the rest of the economy,” he said. “The fact that the Number 1 economy in the country is sporting export growth like this is very good, very timely news.”
A robust export sector in Ontario would also provide a boost to the federal government’s coffers. Federal finance Minister Joe Oliver is set to deliver the government’s fall economic and fiscal update in Toronto on Wednesday.
Overall, Ontario exports, which reached $164 billion in 2013, will increase by 7 per cent in 2014 and 5 per cent in 2015, according to the new outlook.
Canadian companies that have adapted to doing business with the loonie at or above parity with the U.S. dollar will get an additional boost from the currency’s decline, Hall said.
The province’s industrial machinery shipments are expected to see gains of 10 per cent this year and 17 per cent in 2015. “It’s at the leading edge of a wave of investment that’s washing across the U.S. at the moment,” Hall said.
Rising industrial output in the U.S. will also boost the export growth of Ontario’s chemicals and plastics industry by 12 per cent and 5 per cent export growth in 2014 and 2015, respectively, the report said.
Export growth in this area doubled this year compared to 2013, Hall said. “When America is gearing up its industrial production, chemicals and plastic are a huge input in that process.”
The auto industry — which accounts for just over one-third of the province’s total exports — has been surprisingly strong this year and is nearing pre-recession production levels. Continued growth is forecast for 2015, the report said.
The EDC forecast is calling for the auto sector to expand by 8 per cent in 2014 and another 3 per cent in 2015.
Earlier this month, Honda of Canada announced plans for a $857 million upgrade to its plants in Alliston, Ont. The investment, though significant, is not expected to increase capacity at the facility, Hall said.
“Considering the competitive factors and capacity constraints, the sector is continuing to perform well,” Hall said. “A lower Canadian dollar and increasing U.S. auto sales will help to support the industry’s growth, but it will continue to face competition from Mexico and southern U.S. states.”
Mining and metals, the province’s second largest sector, is expected to grow by 3 per cent and 6 per cent in 2014 and 2015 respectively, with lower commodity prices keeping a lid on future production plans.
Original Link: http://www.thestar.com/business/economy/2014/11/12/ontario_exports_set_to_surge_edc_forecast_says.html