Weaker Canadian dollar could impact retail sales in Whatcom County

Loonie falls below 92 cents

THE BELLINGHAM HERALDJanuary 14, 2014 

Canadian Dollar

Canadian shoppers Kelly McCague, left, of Vancouver, B.C., and Mandy Meier of Burnaby, B.C., laugh while loading up their car Monday, Jan 13, 2014. at Ross Dress for Less in Bellingham. "It is still so much cheaper," in the U.S. than in Canada, even with the weaker loonie, said Meier.

PHILIP A. DWYER — THE BELLINGHAM HERALD Buy Photo

The Canadian dollar continues to weaken, and that soon could have an impact on Whatcom County retailers.

The exchange rate for the loonie is now at 91 cents compared to the U.S. dollar, the lowest since the summer of 2009. The Canadian dollar has dropped quickly in the first few weeks of 2014, falling 3 cents since Monday, Jan. 6.

A number of factors are contributing to the falling Canadian dollar. As the year-end economic numbers are coming in, the U.S. appears to be in better shape than Canada when it comes to future growth, said Chris Lawless, chief economist at British Columbia Investment Management Corporation in Victoria, B.C. Also, if the U.S. continues to increase oil production and becomes more energy independent, it will put more pressure on Canadian oil exports, further weakening the currency.

"Everything is negative on the Canadian currency front right now," Lawless said. "Many have also thought that the Canadian dollar was overvalued when we had a run-up in commodity prices a few years ago."

Many local experts, including Lawless, believe if the loonie drops below 90 cents compared to the U.S. dollar it would start affecting the number of Canadian shoppers coming to Whatcom County. That's because the price discount British Columbians get in Whatcom County would shrink.

However, with significant U.S. subsidies still in place, milk and other dairy products in Whatcom County probably would remain attractive for Canadians.

Lawless also noted that more Canadians have the NEXUS card, which gets travelers across the border more quickly, and many are in the habit of shopping regularly in Whatcom County. For those reasons, he would expect a potential slowdown in Canadian traffic here to be gradual.

"There are still reasons (for Canadians) to go into the U.S." Lawless said.

As for how far the loonie will weaken, Lawless said what usually happens is currencies overshoot when it comes to weakening or strengthening. He said some economists now think the loonie will drop to the 80-85 cent range. While that could happen, Lawless expects the loonie to settle around 90 cents.

Lawless doesn't expect the Canadian government to take action that might boost the loonie. A weaker Canadian dollar helps the Canadian export sector, making it easier to sell products to other countries. While the Canadian dollar was strong, it benefited the Canadian consumer, who has increased debt through spending.

"I think the government would want to see growth in exports rather than through more consumer spending," Lawless said.

The Canadian dollar has remained above 90 cents for the past four-and-a-half years. It fluctuated wildly around the time of global financial meltdown, rising above parity to the U.S. dollar in March 2008, falling to 77 cents by March 2009.

Reach Business Editor Dave Gallagher at 360-715-2269 or dave.gallagher@bellinghamherald.com. Read the Business Blog at bellinghamherald.com/business-blog or get updates on Twitter at @bhamheraldbiz.

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