Summary
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Canadian exports have been the victim of a long and deep recession in the United States. Exports have fallen more than 20% in volume terms over the course of this downturn, backsliding for eight straight quarters since Q3 2007. This is the longest negative streak since at least 1960.
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The United States being Canada’s most important trade partner, it comes as no surprise that the tide of Canadian exports is heavily influenced by the cyclical phases of U.S. domestic demand.
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There are two main drivers of demand for Canadian exports: U.S. consumption and U.S. investment. U.S. consumption will add to Canadian exports growth but, owing to ongoing consumer deleveraging south of the border, its positive input will be more subdued.
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However, U.S. investment spending is set to bounce back now and will have a significant positive impact on Canadian exports growth.
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With the global economy recovering and U.S. economic growth next year projected at about 3.0%, Canadian exports should expand more than 4% in 2010.
