Quebec's forest industry likely to see 20% growth in lumber exports over next two years, says Export Development Canada's chief economist; cites pent-up demand for housing in US, statistics showing US is forming 1.4 million new households per year

Wendy Lisney

REGINA, Saskatchewan , April 30, 2014 (Leader Post) – Canada's trade performance will be one of the few bright spots in the economy over the next couple of years, says Peter Hall, vice president and chief economist at Export Development Canada.

The federal agency pegs growth in Canadian exports at six per cent both this year and next, he said Tuesday in a presentation to the Montreal Board of Trade. Quebec will lag the national average with four per cent growth in provincial exports expected both this year and next.

Growth in Canada has been held back until now by high levels of consumer debt. Analysts have been waiting for a while for the economy to "rotate" from domestic consumption toward exports as global conditions improve.

Hall said those conditions are in place, particularly in the United States, which remains Canada's biggest export customer. During the last year or two, fiscal issues in the U. S. have had a negative impact on economic growth, but it looks like clear sailing for the U. S. economy.

Leading indicators are rising and daily economic news releases often exceed expectations, he noted. "Something sustainable is going on."

One factor is pent-up demand. Since the financial crash and recession of 2008-09, consumers in the U. S. have been on tighter budgets, but they are starting to spend more freely. For example, the average age of vehicles on the road exceeds 10 years and that's a trigger point for new car sales.

The housing market continues to recover as well, driven by new household formation. Statistics show the U. S. is forming over 1.4 million new households a year and that will lead to housing starts of more than one million this year, with potential for even more in 2015.

The housing boom is great news for Quebec's forest products industry, Hall said, which should see export volumes grow by 20 per cent in the lumber business.

Confidence is rising among both consumers and businesses, he noted, and not just in the U. S. but also in key areas like Europe and Japan.

That's one reason that global economic growth will register 3.6 per cent this year and 4.2 per cent in 2015, he predicted. A contributing factor in the improving global picture is that government austerity programs have done their work and will gradually take less of a bite from economic growth.

Fiscally challenged countries like Greece and Spain, once considered "lost causes," are moving quickly toward balanced budgets.

Even in the U. S., where fiscal drag trimmed economic growth, governments will be taking much less off the table.

Growth there should hit three per cent this year and almost four per cent in 2015.

One risk to the forecast is that the U. S. central bank, the Federal Reserve, could tighten more aggressively as it winds down its bond-buying program, known as quantitative easing, which has supplied extra liquidity to the economy.

Hall singled out several areas where Quebec exports should prosper. Along with forest products, metals should gain and manufacturing exports, particularly aircraft products, will do well as the recovery cycle progresses.

The agri-food sector is also gaining attention as the world sees large consumer markets develop in China, India, Brazil and Indonesia.

This presents new opportunities for Quebec producers, he said.

An important component in any export forecast is the rate of exchange with the U. S. dollar. Hall projects the Canadian dollar at 93 cents U. S. during the next couple of years.

The outlook will also depend on Quebec's ability to "accommodate growth," particularly in the labour market. We're at the point where demographic change is starting to have a real impact on the availability and supply of workers, and employers will have to be careful to "love them or lose them."

Hall also cautioned that Quebec companies will need to invest more to profit from export opportunities and that the competition for investment capital will be tight.

phadekel@videotron. ca

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