Telegraph Journal Published Friday December 16th, 2011

Signs of stability in the American housing market is welcomed news for New Brunswick's forestry sector, says David Plante, vice-president of the Canadian Manufacturers and Exporters in New Brunswick and Prince Edward Island.

During a conference call Thursday outlining global economic predictions for 2012, BMO Capital Markets deputy chief economist Douglas Porter said that the housing market in the United States is starting to show signs of settling down.

"In recent months, we have seen some signs of stabilization. I think it would be an overstatement to call it improvement but it does seem like things are started to bounce along the bottom," Porter said. "I think it is probably too early to expect a full start to a recovery next year but we do see home starts rising."

Porter said the housing market saw a modest increase in 2011 but in 2012 they are predicting about a five per cent increase in home starts.

The analysis is good news for New Brunswick because exports to the U.S. represent about 75 per cent of the province's forestry production.

"The fact that this market is stabilizing, if not improving, is certainly good news for the sector, which has been struggling for at least the past seven years," Plante said.

In 2005, Plante said there were 75 pulp and paper saw mills, fibreboard, and wood pellet plants operating in the province. By 2009, only 47 were still open.

"New Brunswick is so closely tied to the United States. Any blip in the American housing market is strongly felt here," Plante said.

Added competition from the B.C. forestry sector is also putting more pressure on the already troubled sector in New Brunswick.

"B.C.'s wood products sector was very heavily dependent on the U.S. for a number of years and then they started expanding into China. But they are finding that the China market is now slowing," Plante said.

Overall, things are starting to look up for the beleaguered forestry sector, which saw an production increase by 17.7 per cent in 2010. It was the first increase since 2004.

Plante said that growth is expected to continue in the sector with a forecast production increase of 13 per cent for 2012, following a one per cent decline in 2011.

"What we are really talking about here is stabilization of the U.S. marketplace. That would be very welcomed news for the province."

Telegraph Journal December 16, 2011

Brazil may be the next big market for Atlantic Canada to tap into according to Bernard Valcourt, minister of state for the Atlantic Canada Opportunities Agency.

Valcourt said recently published research, A Study to Identify Key Sectors of Opportunity for Atlantic Canadian Firms in Brazil, prepared for the Canada-Atlantic Provinces Agreement on International Business, confirms the potential for more trade with the South American country.

"The study focused on nine sectors that are well-developed here in Atlantic Canada and it concludes that there is strong potential for doing business in Brazil," he said.

He said there is a great deal of demand in Brazil for life sciences, biotechnology, information technology, environmental technology, oil and gas, mining, and equipment and services.

"We want to encourage our private sector to embrace Brazil," Valcourt said.

"When you look at Brazil, which represents more than half of South America, in terms of geographical area, population and economy, it is an important player and ACOA and the Canadian government's overarching objective is to proactively and creatively engage with this economic powerhouse to secure future prosperity in Canada and to ensure our global competitiveness," he said.

Mark Mackenzie, director of sales and marketing for Fredericton-based Green Imaging Technologies Inc., a software company that deals extensively in the oil and gas industry, is starting to explore Brazil's potential.

"We see (Brazil) as one of our biggest growth potentials," he said. "There are a lot of people in some of the research institutes and some of companies in Brazil that are doing some of the analysis our software is used for."

Mackenzie said that the company has a Brazilian partner that could make six or seven sales in the country soon.

"It could be a big chunk of our market in the next year or two."

Weekly Commentary by Peter G. Hall, Vice-President and Chief Economist, EDC

Can we trust our instincts? These days, that's a tough call. We are bombarded with data that is slumping one day and soaring the next. Worse still, the related analysis seems to ride the same roller-coaster, fogging the view even more. The rough ride is weighing on sentiment, and Canadian exporters are no exception: in mid-autumn, their confidence plunged to the fourth lowest level on record, throwing Canada's positive trade outlook into doubt. Are all bets now off?

The recent slump is dramatic. The Trade Confidence Index (TCI) shed 9.2 points in the autumn poll, the second largest semi-annual tumble in the survey's 11-year history. What is more, this puts the TCI in the same zone seen just prior to both the tech wreck and the 2009 collapse in global trade. If the TCI is still blessed with great foresight, we could all be in for a nasty shock. Why the sudden setback?

Consider the context. The survey was conducted in the first two weeks of October. This followed a significant weakening of global growth over the summer months, and turmoil in bond markets as Euro-fears escalated. Stock markets were also in recoil, down 18.1% from earlier-year peaks. Adding insult to injury, commodity prices - especially base metals - were in freefall during September. Small wonder exporters were in shock.

But is this enough to undermine trade? Maybe not. Check out movements in the TCI's five components. The largest down-shift was in the perception of near-term economic conditions. Confidence in world conditions melted the most, with 60% of respondents expecting a worsening, up from just 22% in the spring; only 9% expected an improvement. Those expecting an improvement in domestic economic conditions shriveled to just 12%, while a quarter of those polled foresee deterioration. Exporters were somewhat more bearish about international business opportunities.

Oddly, exporters were not nearly as pessimistic about actual sales. Almost half of respondents expect near-term improvement in international sales, down modestly since the spring, with a further 39% expecting status quo. Results for domestic sales were not as strong, but only 10% predict slower sales, a marginal increase since the spring.

Does this make sense? Exporters have been rattled in the past months, not the least by events in Europe and the disaster in Japan last March. Among respondents, 20% said that these events have impacted their activities. But somehow, their order books have remained fat. Thus far in 2011, new manufacturing orders are up 16% at annual rates, and unfilled orders are up by a stunning 26%. These orders will soon turn into sales, strongly suggesting that deterioration is not imminent.

Although it has proven to be a reliable bellwether in the past, the TCI may be experiencing its first false start. It wouldn't be alone. US consumer confidence tanked at the same time, only to recoup its losses in the November survey. Similarly, while sentiment sagged, sales stood stalwart - further evidence that for a moment, the world seemed to lose its collective nerve in spite of solid activity.

The bottom line? Oftimes we can trust our instincts, but this time they seem to have let us down. We can only hope so - if they are right, exporters are in for a drubbing.