C&W Industrial Research MarketNote: Will the Declining Canadian Dollar Spur Manufacturing Growth in Canada?
The declining value of the Canadian dollar could mean better days ahead for Canada’s manufacturing sector. Canadian manufacturers have historically benefited from a weaker Canadian dollar, allowing them to be more competitive internationally. With roughly 75% of Canada’s total exports going to the United States, increased demand from a strengthening U.S. economy could not come at a better time. The globalization of manufacturing has created fierce competition and many manufacturing operations have closed shop in Canada, only to relocate to the U.S. or Mexico where unions are weaker and wages relatively low. Since the second half of 2013, the Canadian dollar has been steadily declining providing a welcome rise in demand for Canadian products. With a current Canadian dollar value of $0.92, which could potentially drop to as low as $0.85 by year-end 2014 according to several economic forecasts, Canadian manufacturers could see continued growth and an uptick in activity on exports, particularly to the U.S.