Auto Parts, Vehicle Sales to Lead Growth in Ontario Exports

Ontario’s export sales are set to grow by 15% in 2010 and a further 7% in 2011, led largely by vehicle and auto parts exports, according to the Provincial Export Forecast released by Export Development Canada (EDC).
EDC characterizes 2010 as a bounce-back year for Ontario, as the province will post strong growth rates after last year’s manufacturing shutdowns and closures. While the return to growth is a relief, EDC pointed out that the province’s manufacturing activity will remain suppressed through 2011 compared with past performance.
“Ontario’s exports are set to outperform the national average this year thanks in part to the magnitude of last year’s decline, but also due to strength in key sectors,” said Peter Hall, Chief Economist at EDC. “In addition, the combination of the implementation of the HST, significant domestic infrastructure spending, and a favourable investment environment should lay the groundwork for important productivity enhancements over the next few years for the province.”
“Ontario has reason to celebrate its return to growth after 4 years of declining exports, but we should all keep in mind that even with 15% growth, Ontario is still more than 20% off its 2000 levels,” Mr. Hall added.
The motor vehicle sector accounts for 29% of the province’s exports. Overall, EDC expects Ontario’s exports of motor vehicles and parts should jump by 28% this year and 8% in 2011.
Sales of vehicles in the U.S., Canada’s key export market, are expected to partially recover this year, reaching approximately 11.4 million units. Inventories have been significantly worked down and plant capacity utlization rates in Ontario will improve moderately, leading to a significant boost in 2010 exports. Similarly, the auto parts sector will benefit from higher production rates in the U.S.
Next year, EDC believes that U.S. auto sales should continue to improve, providing further momentum for the industry. New opportunities include demand for hybrid and more fuel-efficient components.
The industrial goods sector accounts for 32% of the province’s exports. EDC forecasts that exports of industrial goods will rebound by 15% this year, on both higher shipments and stronger prices, and then a further 4% next year, primarily on volume growth.
EDC believes that the export outlook for several segments of metals and ores, the key sub sector in the industrial goods sector, will be strong this year, thanks to both price movements and rebounding demand.
Despite persistent uncertainty regarding production at Vale’s Sudbury operation, which will have a material impact on exports of nickel and other by-products, EDC expects both steel and precious metals exports to surge this year and next.
The resolution of the contentious Buy American provision of the U.S. fiscal stimulus package, and the peak of fiscal stimulus spending this year will translate into stronger demand for iron and steel products.
High gold prices have spurred activity and exports, and EDC forecasts this trend to continue in both 2010 and 2011, although at a decelerating rate. Exploration and development work in Ontario has been strong, particularly for uranium and gold, which has over 200 projects in the exploration stage.
Canadian exports are forecast to rise 11% in 2010 and 7.6% in 2011. Nationally, economic growth is expected to rise 2.5% in 2010 and 2.9% in 2011. Internationally, EDC is forecasting global growth of 3.7% in 2010 and 4.2% in 2011. EDC’s Global Export Forecast is available at http://www.edc.ca/gef.