Our exporters leading a charmed life

May 9, 2008
Winnipeg Free Press
Written by: Martin Cash

Province's growth near top of list

Manitoba's exporters are defying strong economic headwinds blowing out of Eastern Canada and the United States, with Export Development Canada predicting the province will post the second-best growth rates in Canada this year and next.

EDC is forecasting a six per cent increase this year (down slightly from its forecast in the fall) and nine per growth in 2009, on top of last year's growth of 13.9 per cent.

"It's like you wave a magic wand, Manitoba," said Peter Hall, deputy chief economist at the EDC who was in Winnipeg on Thursday. "What is happening here completely destroys my forecast and runs counter to everything that is going on."

What's going on, Hall said, is a global economic slowdown perpetuated by the U.S. housing crisis followed by slumping consumer demand in the U.S. that is having an impact on trading nations around the world.

Although he said the U.S. may escape a true technical recession -- defined as two consecutive quarters of decline in GDP -- its first-quarter growth of around one per cent is an indication that the world's largest economy has stalled.

He said consumer confidence levels there continue to decline and there is no indication that it has bottomed out.

Hall said he believes the skyrocketing price of oil -- approaching US$124 a barrel -- is not sustainable and the EDC is forecasting it will fall to US$70 by the end of the year.

"The thing about bubbles is that once they burst, there is nothing there," Hall said. "They don't deflate, they just disappear."

The EDC is also forecasting that the Canadian dollar will come back to levels between 86 and 89 cents US by the end of the year.

He said speculators looking for better returns have been bidding oil up, but petroleum processors are saying there is no problem accessing supply, a suggestion that the price spike is at least partly artificial.

On the other hand, Hall said the recent trend to higher prices for agri-food commodities is being driven by true demand, partly from the millions of people joining the ranks of the middle class every year in China and India.

Manitoba has been able to benefit from that trend as well as the increased prices in base metals. But Hall said the latter is likely not sustainable.

But even if metal prices come down, he said Manitoba will continue to benefit from the cycle because one of the effects of rising prices is investment in new production. Crowflight Minerals is in the midst of spending about $100 million building a new nickel mine south of Thompson.

Hall said Manitoba's diversified export lines and some good fortune to be at the right place at the right time has contributed to its ability to continue to dodge the global slowdown bullet.

"If you have the right mix of products you can be in a real sweet spot and at the moment some of it is really good fortune," he said.

While the auto industry tries to figure out the right types of cars to make, Manitoba's bus industry continues to rack up sales. Manitoba's aerospace business is thriving partly because of its good fortune to be involved in the manufacture of the Boeing 787, the fastest-selling commercial aircraft of all time.

He said strong demand for agricultural equipment, newly signed hydro sales and a weakening Canadian dollar as the year goes on will all help boost provincial exports well into 2009.

martin.cash@freepress.mb.ca

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