America's manufacturing sector is seeing a renaissance, and Canadian exporters could piggyback on the buzzing activity.
That's the conclusion of a study by Benjamin Tal, deputy chief economist at CIBC World Markets. It was released as a report underscoring the bustle among U.S. factories, with the ISM manufacturing index showing expansion for the 16th straight month in November.
While worries linger over the strength of the U.S. consumer, factories are humming. Merchandise exports have recouped all the ground they lost during the recession, making it "by far" the speediest export recovery in the post-war era, Mr. Tal said. The biggest jump is shipments to emerging markets - a shift that Canadian firms can take advantage of by helping U.S. firms supply goods to fast-growing markets like China.
"This is a shortcut," he said. It takes time and patience to directly enter a market like China, but working with U.S. firms there "is an easy way of benefiting from this trend without working too hard."
Canadian companies can contribute to this boom by inserting themselves into supply chains. They can supply knowledge, technology, products and raw materials, like steel, to help the U.S. make high-quality goods which are then shipped to growing emerging markets.
Bolstering ties with U.S. manufacturers which in turn are entering emerging markets would be much easier for Canadian firms. It's less risky, plus there's already a shared language, familiarity of culture, and a long history of trade, he said. "You find your way to an emerging market vis-a-vis a market you already know -- and you save on the research involved in entering the Chinese market."
He includes a list of fastest-growing exports to China, which present the biggest opportunities for Canadian firms. They are:
1. Cars
2. Cotton textile fibres
3. Nonferrous base metal waste and scrap
4. Specialized machinery and equipment
5. Food processing equipment
6. Wood
7. Pigments and paints
8. Toys, games and sporting goods
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