Canadian dollar slump hikes cost of U.S. imported goods
Loonie's plunge of 10% will lead to higher prices, BMO says
From Acuras to iPhone apps, suits to sweet potatoes, Canadians are going to be paying more for imported goods, thanks to the loonie's fall against the U.S. dollar.
"It's down roughly 10 per cent from a year ago. That's a very deep decline in a relatively short period of time." says Douglas Porter, chief economist and managing director of BMO Financial Group.
"We've seen deeper drops, but historically that would rank right up there with one of the biggest declines in a 12-month period."
And consumers, Porter says, will pay the price.
"The losers, pretty clear cut: It's consumers. Basically, we have to pay more for anything that's imported or priced in U.S. dollars," says Porter.
It's already happening
Food prices have been increasing for months. Clothing, while often made overseas, tends to be priced in U.S. dollars and has also been getting more expensive.
So too a big-ticket item that Canadians are buying in record numbers. Automakers have started to raise sticker prices on Canadian vehicles.
The Automobile Protection Association says Toyota and Honda, among others, raised prices in the first week of January. Several luxury brands, including Lexus, Acura, and BMW have also made changes to their pricing, with Audi reportedly set to follow in mid-January, the association says.
The APA says most of the increases are modest, an extra few hundred dollars per vehicle.
But it says Honda has raised the suggested retail price on its 2015 CRV Touring, all-wheel-drive model by $750.
"Car companies will take every opportunity that they can to maximize transaction prices or minimize their exposure to the exchange rate," says Jason Stein, publisher and editor of Automotive News.
"We do see prices increasing. We've seen prices increasing across North America. Will they increase a little bit more rapidly north of the border, due to the exchange rate? I think that's probably the case."
It doesn't cut both ways
Stein, a Canadian who lives in Windsor, Ont., and works in Detroit, echoes some of the frustration of some Canadians, who feel automakers were much slower to drop prices in this country when the Canadian dollar was high.
"Interestingly, when the Canadian dollar was above the U.S. dollar, a year, year and a half ago, you didn't see prices dropping."
Last week, Apple raised prices in its Canadian App Store. The 99-cent apps will now cost $1.19 Canadian, a 20 per cent increase. Other apps under $10 went up by about 15 per cent. Apple says the increase is linked to the exchange rate.
Other countries feel it too
But it's not all bad news. The loonie isn't the only currency falling against the greenback.
"This is not entirely a weak Canadian dollar story. Some of it is a strong U.S. dollar story," says BMO's Porter.
"The U.S. dollar is rising against a lot of currencies. So some items we might not be paying a lot more for. For instance, some items from Europe or from Japan, might not be going up that much in price because their currencies are also weakening."
But with the U.S. accounting for about half of all Canadian merchandise imports, the dollar's doldrums will hit most Canadian consumers in the pocketbook.