WATCH ABOVE: Canadians are used to hearing that a low can be good for the overall economy because it makes our exports cheaper. But as Vassy Kapelos reports, it seems the low dollar isn’t making our products more competitive just yet.
New numbers from Statistics Canada show February was a good month for exports in Canada, which grew 3.6% to $42.3 billion.
The jump boosted Canada’s overall trade balance in February to a surplus of $290 million from a deficit of $337 million in January. The main drivers were exports of motor vehicles and parts, as well as energy products.
But February appears to be an anomaly when compared to the past two years.
During that time, there were only two other months in which Canada posted a trade surplus. While there are many factors at play, one sparked the attention of Moody’s in the United States: the loonie.
It’s no secret the Canadian dollar has spent the last year falling against the American greenback. Canadians are used to hearing that a low dollar is bad when you’re travelling – but good for the economy. Conventional wisdom dictates a low loonie helps buoy exports, but now there are indications that the low dollar hasn’t paid off when it comes to making Canadian products more competitive.
A recent Moody’s Analytics report points out exports in Canada’s three largest export categories – energy products, motor vehicle and parts, and metal and non-metallic mineral products – declined in each of the last three months of 2013.
“Exports have not seen such an appreciable rise, although the currency, the Canadian currency has fallen about ten percent over the last year”, said the report’s author Adam Goldin.
Goldin pointed to a lukewarm economic recovery in the U.S. as a reason for the lag.
“It’s not bringing in as much products as it usually does. A large portion of that is that they’re simply importing less energy due to our shale gas revolution, if you will, he said.
Another factor affecting exports could be a lack of certainty around where the dollar is going.
“There has to be some certainty that the Canadian dollar is trending downwards,” said Jason Myers, president of Canadian Manufacturers and Exports.
“If we see a lot of volatility in the currency, then that’s a problem, because it’s very difficult for exporters to manage volatility,” he added.
That’s a familiar concept for Mark Zimny. Zimny is the president and CEO of Promation, a company that makes tooling and robotic systems for the auto industry.
The importance of the value of the Canadian dollar can’t be underestimated for the entrepreneur from Oakville, Ont.
“What’s going to help me? Ideally a lower dollar,” he said.
For Zimny a 90-cent dollar is “a glimpse of the hope, but when it gets back to 85 cents I can really do business with the United States and also others.”
Zimny is supportive of government efforts to foster export growth. Ottawa has pursued an aggressive trade agenda, most recently working on deals with the EU and South Korea.
“Focusing on the dollar as a driver of export growth alone would be a big mistake,” Minister of Trade Ed Fast said. “It’s only one small part, obviously as the dollar decreases in value, manufacturers welcome that because it makes their products more competitive from a price standpoint, but we as a country have to become more competitive right across the board”
Fast said his government’s trade agenda will have an impact on exports in the long term.
“The future looks bright for our exports but the global economic recovery is still taking some time to take root,” he said.
Nobody knows that more than Zimny. He’s optimistic trade deals will be a big help, but for him it’s all about the buck.
“This is nothing compared to the dollar value – lower Canadian value is number one in terms of exporting of the goods,” Zimny said.