BMO Annual Business Outlook for 2013: Canadian Businesses More Reliant on Trade with the US

In today's uncertain global economy, Canadian businesses are becoming increasingly reliant on trade with the United States, according to the 2013 edition of the annual Business Outlook from BMO Bank of Montreal. By comparison, reliance on trade with other export markets, including Asia, Europe and Mexico remains relatively unchanged.

The report, conducted by Pollara, shows the majority of Canadian businesses expect the Canadian and U.S. economies will improve next year, while pessimism remains on the prospects for Europe. According to the poll:

·       Overall, 39 per cent of Canadian business owners say they are reliant on the U.S. for trade - up eight percentage points from last year

·       For large businesses (greater than 50 employees), 61 per cent are reliant on trade south of the border

·       One in four large businesses plan to expand their operations into the U.S. in 2013

·       Only 16 per cent say they are reliant on Asian markets; 13 per cent are reliant on Europe, and eight per cent on Mexico

"Canadian businesses are showing a growing level of confidence in the prospects for the North American economy, and they continue to look for opportunities to grow beyond our borders," said Cathy Pin, Vice-President, Commercial Banking, BMO Bank of Montreal. "What is most interesting is that while Canadian businesses may have looked to diversify their supply chains and sales markets beyond the U.S. during the economic downturn, we are now seeing them once again look south for growth opportunities. Clearly, our proximity and familiarity with U.S. markets continues to be a strong factor when businesses make expansion plans."

"The U.S. share of Canadian trade has dropped from over 80 per cent near the end of the 1990s to approximately 68 per cent, but has stabilized in recent years," said Robert Kavcic, Economist, BMO Capital Markets. "The broader trend, however, is likely to remain one of trade diversification to countries outside the U.S."

Canadian Business Reliance on Trade

Reliance on market

 

Province/Region of Canadian Business

 
 

NATIONAL

 

BC

 

AB

 

Prairies

 

ON

 

QC

 

ATL

 

UNITED STATES

39

%

39

%

40

%

57

%

42

%

32

%

34

%

ASIA

16

%

15

%

11

%

27
---

%

17

%

14

%

16

%

EUROPE

13

%

17

%

9

%

19

%

13

%

10

%

11

%

MEXICO

8

%

11

%

7

%

19

%

8

%

5

%

6

%

The study also found that for specific sectors and their reliance on trade with the United States, Canadian retail businesses showed the strongest degree of reliance at 49 per cent. This compares to:

·       Manufacturing - 46 per cent

·       Business & Financial - 41 per cent

·       Agriculture - 38 per cent

·       Services - 28 per cent

·       Construction - 22 per cent

Retail businesses also had the highest level of reliance in Asian markets (27 per cent) and Mexico (18 per cent). For European trade, Canadian manufacturing - at 21 per cent - was the strongest level of reliance.

Business Confidence in Economies

Canada

The survey found that 39 per cent of owners believe the Canadian economy will improve next year, compared to only nine per cent who believe it will worsen. 46 per cent believe it will remain about the same.

United States

Looking to the United States, the 41 per cent of Canadian business owners believe that economy will improve, 28 per cent expect it will be the same as 2012, and 16 per cent say it will worsen. Among owners of companies who say they are reliant on U.S. trade, 52 per cent believe the economy will improve. This number increases for owners of large companies who are reliant on the U.S. for trade (61 per cent say it will improve).

Europe

Canadian business owners are more pessimistic about Europe (improve 18 per cent, worsen 31 per cent). For those that rely on trade with Europe, 38 per cent expect the economy to worsen.

on October 5, 2012