If The Cdn. Dollar Is Soaring, Why Aren’t Prices Cheaper?
Posted June 13, 2007 12:00 pm.
This article is more than 5 years old.
For years Canadians seemed resigned to the fact that the American dollar loomed over them like a giant green Goliath on steroids. The Yankee buck was a powerhouse prone to kicking sand on our comparatively puny, anemic loonie. As a result, it was understood that we’d be paying significantly more for the same products. It was a fact of life.
But while Canadian currency has dramatically bulked up and now stands almost eye-to-eye with America’s dead presidents, the discrepancy when shopping remains.
Pick up a book and you’ll find, for instance, a huge, seemingly inappropriate gulf between the Canadian and American price tags. The same goes for anything from birthday cards, to cars and clothes.
And now frustrated Canucks are taking note.
“I bought a birthday card for my nephew that was $5 U.S. And it was $8 Canadian, and I said to the clerk, ‘That’s ridiculous. You know, that’s a 60% exchange rate,’ ” complains a man who knows a thing or two about loonies and toonies, BMO economist Doug Porter.
Despite an exchange rate of mere pennies, Porter says at the retail level we’re still miles apart.
“There is roughly a 10% price gap between Canada and the U.S. Even when you use a very conservative exchange rate like 88 cents, which is what the average has been over the last year and a half,” he said.
Some retailers argue the prices were set long ago, but most shoppers say they don’t buy it, claiming retailers are padding their profits by not honouring the current exchange rates.
“It is reasonable to have a little bit of a gap for now between Canadian and U.S. prices but I think, over time, you’ll see that gap compress more and more,” Porter adds.
The economist notes another down side — the high loonie and high prices could drive up inflation. The Bank of Canada is already hinting it may raise interest rates, which would make financing those bigger ticket items even more expensive.
