Plummeting loonie fails to slow cross-border shopping much
WATCH: Minister of Industry James Moore says the government will be coming forward soon with an initiative that could help reduce the need for consumers to cross the border to shop.
Canada’s love affair with cross-border shopping has seen “significant growth” over the last several years – and the phenomenon has yet to be slowed much by the loonie’s recent swan dive.
Statistics Canada said Wednesday retail shopping by Canadians in the United States perhaps more than doubled between 2006 and 2012, to as much as $10.8 billion annually.
Some experts suggest that number could underestimate the total amount of cash flowing across the border into U.S. outlet malls, restaurants, hotels and other businesses.
“Every category except motor vehicle imports has seen significant growth,” the federal agency noted.
Same-day shopping trips climbed 128 per cent over that time to $844 million annually, while the estimated value of goods purchased on overnight trips doubled to an estimated $3.6 billion.
Those estimates represent the mid-range of StatsCan’s estimates, however. At the high range, money spent on same-trips amounted to more than $1.2 billion and $4.7 billion respectively.
StatsCan cited as prime contributing factors the loonie’s strong appreciation in recent years, as well the price gap that persists between the same products sold in Canada and the United States but are priced higher here, which entice shoppers to head to U.S. stores.
“This is especially true for those living right along the border when it comes to shopping for goods that are traditionally cheaper in the United States, like gasoline and groceries,” StatsCan said.
Before this year’s slide, the Canadian dollar had climbed sharply over the last decade against the U.S. greenback, reaching parity in 2007 and then again after the recession in 2011 — igniting a record boom in Canadians shopping abroad.Click here to view data »
But a variety of factors have sent the loonie spiraling in the last year, with the dollar trading 14 per cent lower than its peak of US$1.04, hit in July 2011. The exchange rate has hovered around 89 cents in recent days.
Show goes on
Still, Canadian shoppers are still crossing the border in droves to shop – at least for now. Experts at BMO Economics said in a recent note that same-day trip into the U.S. were down only about 7 per cent through the first six months of the year.
“The sag in the Canadian dollar over the past 18 months has taken some of the steam out of cross-border shopping, but only some,” Bank of Montreal chief economist Doug Porter said at the time.
While Statistics Canada suggested Wednesday that cross-border shopping amounted to a maximum of $10.8 billion in 2012, or 2.3 per cent of Canadian retail spending, Porter and others believe the real figure could be has high as $20 billion in total.
“Estimates on the exact economic impact of cross border shopping have varied,” StatsCan said.
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