Export recovery remains elusive: HSBC

TORONTO—The first quarter of 2014 ended with a whimper on the trade front, according to David Watt, Chief Economist, HSBC Bank Canada.

Watt says this was anticipated, given the strike at a West Coast port through the month, however the strike appears to have had little impact.

“This suggests that there will be, at best, only a minimal increase in trade activity in April owing to the resolution of the dispute,” he says.

Exports rose an annualized 20.5 per cent, a nine-quarter high. However, the gains were all on price, as real exports fell by 6.5 per cent.

Watt attributes some of the weakness in first quarter exports to the sharp decline in January associated with bad weather, and to the port strike in March.

“That said, the lack of traction in real exports has taken on greater significance given that Bank of Canada Governor Poloz has recently highlighted that the outlook for the economy hinges critically on a recovery in exports,” says Watt.

“That recovery remains elusive, though we continue to anticipate a rebound in exports through the rest of 2014. We expect real exports to rise by 1.9 per cent year-over-year. The risks though are to the downside. So too are the risks to our forecast that imports will be flat in 2014. As a result, trade does not yet pose a risk to our GDP forecast of 2.2 per cent”

Watt shes he expects the Bank of Canada to remain in neutral until late 2015.