Entries in Canadian Chamber of Commerce (15)

Wednesday
Aug192015

CCC: Export Revolution - When Zero Is Actually Pretty Good  

 

By: Hendrik Brakel, Senior Director, Economic, Finance & Tax Policy, Canadian Chamber of Commerce

Economic weakness abounds! The country is in recession and exports are “stalled” according to the Bank of Canada. But if you dig into the numbers, something bigger is happening. 

The first five months of export data show a huge 31% decline in oil, with natural gas falling 40%, a devastating hit to Canadian exports. The big question is whether the positive effects of a weaker dollar and a stronger U.S. economy can make enough of a difference. Skeptics remain doubtful about whether our exporters have enough capacity for a big increase in production: there are no state-of-the-art Canadian factories waiting for the lights to be turned on. 

One of the most optimistic forecasts for 2015 came from our friends at Export Development Canada. Their forecast for 2015 export growth was... zero. A big goose egg. 

Actually, this was a cheery forecast because they were essentially saying that Canada’s non-energy exports, such as manufactured goods, technology, services and agriculture, would be strong enough to offset the huge, gaping hole from the decline in energy sales. 

So far, it looks like EDC is right. Canada’s export manufacturers have ramped up production and are in overdrive. The strongest contributor to growth is the automotive sector, rising 9% this year thanks to a resurgent U.S. economy. American auto sales hit 17.4 million vehicles, record levels not seen in 15 years, as our members in the auto sector are struggling to keep up with demand. 

And it’s not just autos; exports of machinery and equipment are up 9%, electronic equipment up 15%, aircraft up a staggering 33%. Services will gain 5% this year thanks to a new rising star: tourism. So, does this make up for the huge decline in energy? 

Not quite. So far in 2015, exports are down 1.3%. But if we see greater strength in the second half, as we expect from a U.S. economy that is firing on all cylinders, then Canada’s exports might even get to modest growth. 

This means we are in the midst of a very strange recession. Ontario, Québec, B.C. and Manitoba are all set to grow at a healthy 2% range, with solid export growth across-the-board. Only Alberta and Newfoundland will see GDP contracting this year by around 1% and exports tumbling by 15% or more. Canada overall will see GDP rise by just 1% in 2015. 

The big challenge is that growth will get harder from here. With a soft domestic economy, we’re increasingly dependent on exports. Thanks to weak commodity prices, further export gains can only come from rising productivity, world-leading technology and innovation. We need a comprehensive plan to improve competitiveness so that Canadian companies can win. 

Wednesday
Jun172015

CCC: Business win! Commitment to reduce internal trade barriers

On June 9, Canada’s provincial, territorial and federal trade ministers announced that they are committed to renegotiating an internal trade deal by March 2016. 

Here at the Canadian Chamber, we welcomed the announcement with enthusiasm as we have been pushing for the dismantling of internal trade barriers for years; this issue has also been part of our list of the Top 10 Barriers to Competitiveness since 2013.

This new agreement is the first step towards breaking down a significant barrier, leading to a more competitive and eventually a more prosperous Canada.

As part of the Business Alliance, composed of the country’s top business associations, we called for a domestic trade deal as ambitious and as comprehensive as any trade agreement with another country. The agreement should enhance regulatory cooperation among jurisdictions, provide for mutual recognition of goods and services and ensure an effective and efficient dispute resolution mechanism.

We look forward to contributing to the next steps in the reform process.

In the National Post on June 8th, the leaders of the groups making up the Business Alliance wrote a commentary on the internal trade issue.  It included the following excerpt:

"Our members know: trade barriers stifle growth, limit productivity and hinder prosperity. They impede
businesses’ ability to grow and compete internationally. Disjointed and misaligned regulatory frameworks slow down projects and impact investment decisions. We have been stressing this message for years and the time has come for our political leaders to step up and give Canada the internal trade framework it deserves.

The Agreement on Internal Trade (AIT) is celebrating its 20-year anniversary on July 1, but there will be no fireworks. At the time of the original AIT, Canadians were promised a new era in interprovincial trade, a reduction or even an elimination of barriers between jurisdictions. That promise has yet to come to fruition. Some progress has been made, but the sad truth is that our international trade agreements are more ambitious and comprehensive than the AIT".

Link to the full article in the National Post June 8, 2015: http://bit.ly/1GOTKl2

 

Wednesday
Apr082015

CCC: What does 2015 hold for Canadian Growth?

Article By: Hendrik Brakel, Senior Director Economic, Finance & Tax Policy, Canadian Chamber of Commerce

Since the Bank of Canada lowered interest rates as “insurance” against the risk of a sharper downturn, many have been asking: How long will it take for the fall in oil prices to impact the broader economy and how severe will the slowdown be? What will it mean for Canadian business? 

Canada’s fourth-quarter GDP growth came in at a brisk 2.4%, which looks pretty good, but when we examine where the growth came from, there is cause for concern. Household consumption was OK, but exports and business investment both declined. Instead, you can see in the adjacent graph that the biggest contributor, accounting for three quarters of the rise in GDP is inventories. 

A sharp rise in inventory can be caused by businesses stocking up in anticipation of stronger sales in the future or, alternatively, if a sharp deterioration in demand leaves unwanted stock. What’s the likelihood that business was stocking up in anticipation of a bonanza at the end of 2014? Not very good. Instead, we’ve heard anecdotally that companies in the oil patch were hit with a particularly sharp drop in sales, and the concerns are broad-based with the auto sector accounting for a big part of rising inventories. 

There are three reasons we’re expecting a significant slowdown in Canada. Firstly, the big declines in capital expenditure have not yet been seen in the broader economy. Remember that oil prices remained above $75 until the middle of November and only fell into the $50 range in December. There were many announcements of cutbacks at the end of 2014 but these will not be seen in operations on the ground until the first half of 2015, a point confirmed by many service providers in the energy industry. 

Secondly, consumption looks soft as retail sales fell by 1.7% in January, signs that consumers are staying home. Also, that big boost from inventories will reverse and become negative in the quarters ahead as the closures of Target, Mexx, Jacob and Sony subtract billions from the inventory tally this year. 

Thirdly, it is true that many manufacturing industries are seeing a boost in sales from the weaker loonie and a stronger U.S. economy. Canada’s auto sector and aerospace industry exports have been particularly stellar. However, oil and gas accounts for 24% of Canadian exports, and those prices have fallen by half. It will take a long time before manufacturing can compensate for a 12% hit to Canadian exports. 

Canada’s domestic economy has a hit a soft patch, so we should be braced for bad news in the first half of 2015. Overall GDP growth should come in around 1.8% this year, and Canadian businesses will have to focus more than ever on exports if they want to maintain the strong growth rates we’ve seen. In the meantime, it looks like we may need that insurance. 

Wednesday
Apr012015

What business needs to know about the Canadian economy

On Friday, March 27th, the Peterborough Chamber of Commerce held its 126th Annual General Meeting with about 45 members at the Holiday Inn Peterborough Waterfront.   Along with approving the actions of the Board of Directors and financial statements for 2014, the attendees heard from Canadian Chamber of Commerce (CCC) Senior Director of Economic, Financial & Tax Policy Hendrik Brakel.  

Brakel broke down the current state of the Canadian economy from the impact of the US economic recovery to oil to Canadian household debt. 

“Business investment and exports are how the Canadian economy will grow in the near future,” he told the crowd.  “Ontario will be leading the way on both of those fronts for Canada.” 

Oil prices will rebound, Canadian interest rates will remain low and we will see emerging markets slowing their growth compared to recent trends.  One word of caution from Brakel was that the Canadian consumer needs to take a break and start paying down debt. 

Brakel also spoke about the upcoming federal election and on which issues the CCC will be focusing.  

"Identifying the needs of businesses across the country is the first step," says Brakel.  "We know what businesses need to be effective: people, capital, technology and innovation, access to markets and an efficient regulatory environment."

From that the issues flow. The Temporary Foreign Worker file has been a struggle for certain industries since the new rules came into effect last June.  There will be a push for a better approach to environmental regulations and ways to manage our natural resources, along with addressing the skills gap in the labour market, improving access for Canadian goods in new markets and creating a climate for innovation and technology.

 

Wednesday
Feb112015

CCC: 2015 Top 10 Barriers to Competitiveness 

Canada is struggling to remain competitive. Despite its efforts, our country’s level of productivity and, in turn, its level of economic prosperity continues to decline. In its 2014-2015 Global Competitiveness
Report, the World Economic Forum ranked Canada 15th in global economic competitiveness—down one spot from 2013-2014 and 2012-2013 and three from 2011-2012.

Top 10 Barriers

 

  1. Silos in skills development
  2. Entrepreneurs lack capital for Canada’s fastest-growing companies
  3. Lack of clarity regarding duty to consult with Aboriginal peoples
  4. Internal barriers to trade
  5. Canada’s tax system is too complex and costly
  6. Canadian trade is constrained by infrastructure deficiencies
  7. Canada is uncompetitive in the world’s tourism sector
  8. Innovation rate is not sufficient to help manufacturing rebound
  9. Territorial businesses don’t have the tools they need
  10. Canada is missing out on foreign trade opportunities

 

The need for action is urgent. The standard of living of every Canadian depends on how well we as a people respond to the challenge. We must identify and implement real, tangible solutions for breaking down the barriers to our competitiveness and for creating more opportunities and greater prosperity for Canadian businesses and families.

The full report:

Comment through the "Peterborough Chamber" group of LinkedIn.