Southbound border traffic up despite weaker Canadian dollar

THE BELLINGHAM HERALDMarch 2, 2014 

CanadianRetail PAD

A Canadian car heads to the U.S. at the Peace Arch border crossing in Blaine, Friday morning, Feb. 28, 2014.

PHILIP A. DWYER — THE BELLINGHAM HERALD Buy Photo

At least for the first month of the year, the weaker Canadian dollar didn't impact the number of people traveling south into Whatcom County.

According to data collected by Western Washington University's Center for Economic and Business Research, 1,129,744 people went southbound through the five Whatcom County border crossings last month, up 1.8 percent compared to January 2013, when the loonie was at parity with the U.S. dollar.

Crossings also were up 16.3 percent compared to January 2012, another time the Canadian dollar was at parity.

The Canadian dollar strengthened to around parity several years ago and has steadily remained at around 95 cents compared to the U.S. dollar. In January, the loonie weakened for a variety of economic reasons, dropping about 4 cents in four weeks. At the end of February, the Canadian dollar was at 90 cents compared to the U.S. dollar.

What happens to the Canadian dollar is of importance to Whatcom County retailers and tourism businesses. According to the Washington State Employment Security Department, this area employed 11,200 people in retail and 8,800 in leisure/hospitality at the end of 2013, making up about 30 percent of the private sector workforce.

A more definitive look at whether the drop in the Canadian dollar is impacting Whatcom County retail won't be out until this summer, when the Washington Department of Revenue is expected to release first quarter Whatcom County retail sales data.

Many who pay attention to the exchange rate, particularly in Canada, expect the weaker loonie will translate into less Canadian shopping in the U.S. A study done by TD Economics, which provides analysis of economic performance, predicts that the drop in the Canadian dollar will reduce the number of overall visits into the U.S. by about three million in both 2014 and 2015.

"The decline is expected to be concentrated among short-term visits to the United States," according to the report, which adds that the longer trips by "snowbirds" to warmer areas of the U.S. shouldn't be impacted.

Even though the report expects a decline in visits, shopping activity in the U.S. should remain high because of the price gap between Canadian and U.S. goods. Even after factoring in the current exchange rate, it's been estimated that Canadian prices remain about 9 percent higher on average compared to U.S. prices.

"This difference might begin to widen once again as retailers in Canada move to pass onto consumers some of the cost imposed on them due to the weaker Canadian dollar on imported store goods, machinery and other inputs," according to the report.

The change in the exchange rate appears to be having an impact on the attitudes of B.C. residents. According to a survey done earlier this month by Insights West, a marketing research firm with an office in Vancouver, B.C., 61 percent of Vancouver residents surveyed said they took at least one trip across the border to shop in the past 12 months. That's down from 74 percent during the same period in 2013.

The frequency also has dropped significantly in the past year. According to the survey, 10 percent said they've gone cross-border shopping more than 13 times in the past year, down from 15 percent in February 2013. Those who traveled into the U.S. 6-12 times in a year dropped from 14 percent to 9 percent.

Steve Mossop, president of Insights West, said the weaker Canadian dollar appears to have made an impact. A year ago, the Canadian dollar was around parity with the U.S. dollar.

"Parity made cross-border shopping a very attractive proposition a year ago, but the eagerness has definitely slowed down," he said in a written statement accompanying the survey results.

That slowdown hasn't showed up in the local border numbers, however, and that might suggest other factors are in play, said James McCafferty, assistant director at Western Washington University's Center for Economic and Business Research.

"While the exchange rate is important, I do not believe it is THE driving force in the decision to come to the states to go shopping," McCafferty said in an email, noting other factors such as traffic, crowds and shopping options. "It is too simple to focus on one (factor)."

Whatcom County retailers that count on Canadian traffic appear to be seeing mixed results in the first two months of 2014. At Sports Authority, a sporting goods store at Bellis Fair mall, manager Adrienne Waite said they've been seeing similar levels of Canadians compared to previous months. Part of the reason for the steady stream of shoppers is because many are buying Seattle Seahawks' gear.

"There are a lot of Seahawk fans in Canada," she said.

At the Pho & More restaurant near the Bellingham Costco, Jin Soung said they've noticed a drop in the number of Canadian customers since January. Soung, who with his wife, Hana, took over ownership of the restaurant last summer, wasn't sure if the drop is part of the typical post-holiday drop or if it had to do with the Canadian dollar.

The strength of the loonie compared to the U.S. is something Vancouver residents pay close attention to, according to the Insights West survey. When asked to state the current exchange rate, 83 percent were close to the correct rate, with 44 percent either correct or off by 1 cent.

As for what Vancouver residents buy in the U.S., it probably won't come as a surprise to Whatcom County residents: Gasoline topped the list, with 89 percent saying they fueled up either regularly or occasionally. Dining was next (with 83 percent saying they either regularly or occasionally did this), followed by buying clothes (78 percent), buying groceries (73 percent) and finding a place to stay (61 percent).

The survey indicated that 24 percent of cross-border shoppers had a mailbox in the U.S., showing the popularity of buying items online and saving money by having them shipped to a U.S. address.

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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