Canadian shoppers see some gains as C$ holds firm

Fri May 9, 2008 11:16am EDT
 
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By Claire Sibonney

TORONTO (Reuters) - Canadian shoppers still pay more for many retail goods than U.S. shoppers do, but the wide price gap has narrowed considerably since the Canadian dollar rose to match the U.S. one last year.

Responding to customer complaints, many retailers in Canada have lowered their prices toward the U.S. ones, a boon for both shoppers and policy makers. Customers agree that many goods are costing less, and the Bank of Canada can worry less about inflation as certain retail prices fall.

But analysts say there will never be retail price parity to match the almost-parity between the two currencies on foreign exchange markets. Canadians face different sales and import taxes, and some prices will always be different.

"There's not exact parity between the two (retail prices) but it looks like there's enough movement on those fronts to quell the fires of protest," said Doug Porter, deputy chief economist at BMO Capital Markets.

Last September, the Canadian dollar climbed to parity against the U.S. dollar for the first time in more than 30 years. It has stayed around that level for most of the time since, excluding a brief leap to around US$1.10 in November, when one U.S. dollar was worth around 91 Canadian cents.

Porter calculated that Canadian prices were 24 percent higher than U.S. prices on identical goods last September, a discrepancy that prompted consumer grumbles and large numbers of shopping trips to U.S. outlet malls.

His latest research puts the gap at roughly 15 percent.

Porter said factors like higher wages, rent, property tax, and to some extent sales volume, have to be taken into account as well as exchange rate movements.   Continued...

 
<p>Canadian one dollar coins, also known as loonies, are displayed in Montreal, September 19, 2007. Canadian shoppers still pay more for many retail goods than U.S. shoppers do, but the wide price gap has narrowed considerably since the Canadian dollar rose to match the U.S. one last year. REUTERS/Christinne Muschi/Files</p>