High loonie no help for shoppers: BMO
Popular U.S. products still cost Canadians more in their country despite a soaring loonie, according to a BMO Economics report obtained by the CBC on Thursday.
The economics research wing of the Bank of Montreal estimated that fashionable U.S. goods, such as mobile devices and books, are on average more than 20 per cent more expensive in Canada than south of the border.
The appearance of that price gap is despite a Canadian currency that has gained 30 per cent in value compared to the U.S. greenback since 2009.
"There has been precious little movement in underlying relative prices in the past two years, despite the currency's record sprint," said Doug Porter, BMO Economics' deputy chief economist and the author of the draft study.
Mind the gap
Porter converted the American price of certain products into Canadian dollars using a currency average the past three months. In that case, a U.S. dollar is worth 98 cents Cdn.
As a result, for example, an American copy of the Academy Award-winning movies The King's Speech should be worth $19.59 Cdn. Yet, the film actually goes for $24.99 Cdn, a difference of almost 30 per cent, Porter calculated.
Similarly, an 8G iPod Touch should go for just more than $200 using domestic U.S. prices. Instead, the ultra-chic device costs $249 Cdn here.
Finally, a pair of sneakers in the United States that should cost less than $100 Canadian actually retailed in Canada for $147.99, a difference of nearly 50 per cent, Porter estimated.
When the loonie has risen in past years, critics have complained Canadian retailers are merely pocketing the benefit from the high loonie.
That is because with a rising domestic currency, store owners pay less for U.S. goods at a wholesale level.
Yet, by keeping domestic prices roughly where they are, these same retailers are skimming extra profits.
"Essentially, the gap [between Canadian and U.S. prices] has widened 1-for-1 in line with the rebound in the currency," Porter noted.
In response, Canadian retailers have argued their customers expect relatively stable shelf pricing rather than seeing sticker prices change in response to every currency shift.
As well, other factors, such as higher domestic costs for Canadian retailers, can account for a portion of the Canada-U.S. price gap.