TORONTO—In today’s uncertain global economy, Canadian businesses are becoming increasingly reliant on trade with the United States, according to BMO’s annual Business Outlook for 2013.
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, 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, with one in four large businesses planning to expand their operations into the U.S. in 2013.
“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,” BMO commercial banking vice-president Cathy Pin said in a statement.
“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.”
According to Robert Kavcic, economist with BMO Captial Markets, 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.
Kavcic said that trend has stabilized in recent years.
The study also found that for specific sectors and their reliance on trade with the U.S., Canadian retail businesses showed the strongest degree of reliance at 49 per cent.
Manufacturing placed a close second at 46 per cent, according to the report, with business/financial (41 per cent), agriculture (38 per cent) and services (28 per cent) rounding out the top five.
Business confidence in economies
According to survey results, 39 per cent of business 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.
Looking to the U.S., 41 per cent of Canadian business owners believe that economy will improve, while 28 per cent expect it will be the same as 2012 and 16 per cent say it will worsen.
Canadian business owners are more pessimistic about Europe, with only 18 per cent projection an improvement (31 per cent believe it will worsen).