Canadians Still Paying More … But Not Much More

Canadian shoppers are used to something of a price difference between shopping domestically and journeying south of the border to pick up some purchases. For various reasons, the dollar goes further in the States even when taking into account the exchange rate, and this has been known to drive some Canadians to visit family in the States, just happening to do a lot of high-value shopping while there. But just recently this price gap has leveled considerably, according to a study carried out recently. It has not closed entirely by any means, but to see it narrowing is positive both for shoppers and for stores.

Of course, as with any financial story it isn’t just a matter of saying “things have improved to some extent” and leaving the statement there. There is considerably more to it, not least the fact that the findings of the study are contentious, having been opposed by the Consumers Association of Canada. The report itself was unveiled by Doug Porter, Deputy Chief Economist at BMO Capital Markets. In their study last year, BMO found an average price difference between selected products that stood in favor of the US shopper to the tune of eighteen per cent. This year, with the American economy having suffered severe blows, that gap has receded to 6.8 per cent.

Porter puts a lot of this narrowing down to the strengthening in the loonie, which has comparatively thrived while the US dollar has struggled. As the value of the loonie rises against its Southern counterpart, Canadians have comparably more buying power, and it is normal for prices to fall so that business does not go South.

Nonetheless it still depends very much on what your planned purchases are. For example, if you want to drop into Starbucks and enjoy a latte (tall, nonfat) then for the first time it is cheaper to do so on this side of the border. If you are buying a camera, expect to pay slightly more than your Southern neighbor, but only to the tune of about 2%, which is considerably less than once it was. However if you have your heart set on a chainsaw, you might be well advised to check import costs, as they are still 25% more expensive in Canada. Going to the US and bringing it back across the border might have its own problems, too.

Porter insists that this is a sign that Canada’s stronger anti-recession policies have made things better for the Canadian consumer. The Canadian consumer, represented by the Consumers Association of Canada for the purposes of this article, disagrees. Its president Bruce Cran states that there are huge disparities on a number of other products, not least magazines, which differ in price by a massive 28 per cent – double what the report says. The Association argues that as things stand, Canadian retailers are failing to pass on savings they have made importing US-made products to their customers. Nonetheless, the BMO posits that this will always be the case due to institutional differences, but that the gap is narrowing.

 

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This entry was posted on Sunday, August 2nd, 2009 at 4:49 pm and is filed under Canada. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.