Confidence levels among Canadian exporters have declined dramatically as the full weight of a significantly higher Canadian dollar and a slowing U.S. economy hit home, according to the semi-annual Trade Confidence Index survey from Export Development Canada (EDC).

The overall index declined to 67.4 from 72.9 in June 2007, the lowest result since EDC began reporting on trade confidence in 2000.

“Only six months ago, even with a high dollar and significant signs of a U.S. downturn looming, exporter confidence actually increased. What we’re seeing today is a very sudden and steep decline in the persistent optimism of the two previous surveys,” says Peter Hall, vp of economics and deputy chief economist, EDC.

The TCI survey demonstrates that Canadian exporters are more pessimistic about all five of the core TCI indicators: trade opportunities; export sales, domestic sales; and both domestic and global economic conditions. Compared to six months ago, 38% of exporters said that they expect trade opportunities will worsen in the next six months, 30% believed that global economic conditions will also worsen and 25% said that they expect export sales will drop.

Despite the record-breaking highs for the Canadian dollar, over 40% of exporters believe the dollar will continue to increase in value over the next six months. However, the rising dollar is also creating import and investment opportunities for exporters. For example, about one-third of the Canadian exporters surveyed said that they were planning to increase their imports and investments in plant and machinery over the next six months. Over the past few years, the survey has reflected the persistent uncertainty that exporters see in the outlook for the Canadian dollar, suggesting an unusually challenging business planning environment.

The survey shows that 92% of exporters believe that the Canadian dollar plays an important role in a company’s ability to compete in foreign markets. The majority of exporters price their goods and services in U.S. dollars, and for many, the rise in the Canadian dollar has cut into their profit margins. To restore their margins, 33% of exporters (up 7% since spring 2007) are cutting costs and 27% (up 5% since spring 2007) are raising the U.S. dollar prices of their exports. Other strategies, such as currency hedging and changes to business models, showed modest declines.

For more information about EDC and the Trade Confidence Index, visit www.edc.ca/english/docs/ereports/tradeconfidence/country_information_index_e.h tm.