Eugene Moser is paying some of his truckers to drive empty half the time.

Canadian companies have been asking Cambridge, Ontario- based Challenger Motor Freight Inc. to send empty trucks to the U.S., so they can return full of everything from automotive parts to consumer goods, said Moser, the company’s president.

Moser and many economists say a strong currency and weak U.S. demand are to blame for declines in exports and factory sales, which remain 15 percent below the peak they reached in July, 2008. The U.S. is buying the smallest share of Canada’s shipments abroad since November 1982, Statistics Canada says.

“There are customers that are calling us and asking us to run empty into the border states,” such as Michigan and beyond into Ohio, Pennsylvania and Wisconsin, Moser said by telephone from Cambridge, 100 kilometers (60 miles) southwest of Toronto. “When you get a truck down there and you want to come back to Canada, you can almost name your price.”

Statistics Canada may report at 8:30 a.m. New York time today that manufacturing sales increased 1 percent in October, according to economists surveyed by Bloomberg, following declines in three of the previous four months. Exports, which equaled 32 percent of Canada’s economy in 2009, declined by 1.3 percent between July and October, the statistics agency said Nov. 30. Canada sends about three-quarters of its exports to the U.S., with some of the country’s major sales abroad including factory products such as automobiles and equipment.

‘Biggest Risk’

“The biggest risk to the Canadian economy now is the risk rising out of the state of the economy in the U.S.,” Finance Minister Jim Flaherty said in a Dec. 10 interview with Bloomberg Television in New York.

The Canadian dollar’s 25 percent gain against the U.S. dollar since March 2009 is curbing orders for such companies as Montreal planemaker Bombardier Inc. and encouraging imports of equipment to boost productivity.

The statistics agency said Dec. 3 that Canada’s factories now employ 10 percent of the workforce, the lowest in records dating from 1976 when the share was 19 percent.

Canadian economic growth slowed to a 1 percent annualized pace in the third quarter, less than the Bank of Canada’s 1.6 percent October prediction. The trade sector subtracted 3.5 percentage points from growth in the quarter as exports fell and imports rose, government figures show.

Lumber and pulp companies, among the hardest hit by the U.S. recession that triggered a record number of foreclosures, are rebuilding by seeking new markets in Asia, said Tembec Inc. Chief Executive Officer Jim Lopez.

‘Shot in the Arm’

“It’s going to take a few more years for the U.S. economy and the U.S. housing market to totally heal,” Lopez said in a telephone interview. “Our lumber business in China: it’s booming right now. It’s a shot in the arm for an industry that was so dependent on the U.S.,” he said.

Pittsburgh-based U.S. Steel Corp. said on Oct. 1 that it’s closing the blast-furnace and steelmaking operations at the Hamilton Works plant in Ontario because of lower demand. Transcontinental Inc. said Oct. 27 it’s closing a printing plant with 180 workers in Boucherville, Quebec, citing decreased demand for books, catalogues and magazines.

“Without a strong U.S. recovery it’s going to be hard for Canada to improve the trade balance and it’s going to be even harder with a strong currency,” said Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York.

Record Deficit

Canada’s merchandise trade deficit was a record C$2.51 billion in July, and it posted a sixth straight shortfall of C$1.71 billion for October. That decline has come as the trade surplus with the U.S. narrowed to C$1.13 billion in October, the lowest since 1992, Statistics Canada said Dec. 10. The surplus with the U.S. was as high as C$11.7 billion in October 2005.

The lost U.S. business runs counter to Bank of Canada Governor Mark Carney’s October prediction that exports will help lead the country’s economic recovery over the next two years. The bank kept its benchmark interest rate at 1 percent for a second consecutive time on Dec. 7, and said it will remain careful about future increases as falling exports and Europe’s sovereign debt crisis hinder the recovery.

“This is a recovery where our traditional markets are much weaker than they have been in the past,” Carney said at a press conference two days ago in Toronto. “The net export performance has been relatively weak and that reflects in part the weakness south of the border, but in the end it’s also competitiveness in Canada.”

Prime Minister Stephen Harper extended stimulus spending linked to construction by seven months to Oct. 31, 2011, because of a fragile global recovery. Carney may also keep interest rates unchanged until the middle of next year after raising them three times between June and September.

Moser at Challenger Motor Freight, a company founded in 1975 that today services 3,500 trailers, isn’t expecting much of a manufacturing recovery. “Are you going to build a plant in Canada when nobody has any understanding about where the dollar is going to be?” he said.

Bloomberg