While it is possible that competitiveness or foreign demand, which the Bank proxies with a foreign activity measure (FAM), could have been mismeasured, sagging competitiveness seems to be a less obvious candidate.6 Neither the dollar, nor competitiveness defined more generally (i.e., in terms of productivity and wage gaps adjusted for the exchange rate), has shown any evident break in trend.
Most of the export disappointment is specific to the past two years (Chart 10 and Chart 11). Interestingly, the growth in global trade collapsed at about the same time and even more dramatically than the fall-off in Canadian trade (Chart 12). Perhaps the weakness in Canadian exports has a common cause and we should be thankful for what we have.