March 17, 2015 1:21 pm
Updated: March 17, 2015 9:39 pm

Sorry shoppers, lower loonie broadly lifting prices — except on wine

Clothing and footwear prices are poised to move meaningfully higher this year, TD Economics says.

CANADIAN PRESS/AP, Richard Drew
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If you’re not in line for a big raise this year, we have some (additionally) unfortunate but important news: your income won’t stretch quite as far as the lower loonie drives up prices on everything from home furnishings to footwear to food.

Most consumer products imported into the country – read: most consumer products – have started to move meaningfully higher in cost. That’s the grumble-inducing takeaway from a new TD Economics report that lays out the gory details about how the loonie’s tumble is rippling across the retail landscape in 2015.

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While some costs, like expenses on energy and transportation, are feeling downward pressure, the currency decline is ramping up prices across a wide swath of staple and discretionary products and services.

“The emerging big story this year appears to be the meaningful upward pressure on prices due to the weak Canadian dollar,” said TD economist Diana Petramala, who authored the report.

MORE: A new normal at the supermarket — fewer deals, higher prices

The Canadian dollar has collapsed 30 per cent against the U.S. greenback since 2012, with the most acute declines occurring in the last few months as oil prices have cratered.

Retailers have been initially slow to react, TD said, while certain categories, like new cars or furniture, take several quarters for higher prices to flow through to showroom floors or shelves. Petramala said that confluence of factors – the currency drop and lag time for its to feed through to different products – is coming to a head now, which the latest inflation reading out on Friday should confirm.

The February numbers will reinforce the January reading from Statistics Canada, which served as the first “eyebrow raising” sign of widespread price increases for shoppers, delivering “the clearest signs of pass-through yet,” the economist said.

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Food prices

Food prices jumped five per cent to start the year, with imported produce prices rising by double digits compared to January 2014.

“The brunt of the impact has been felt on fruits and vegetables, which grew three and a half times faster in Canada than in the United States,” Petramala said.

Up until January, food prices had been growing at roughly the same rate in Canada as the United States, she said. “Prices in both countries were pushed up by drought and disease that cut global supply,” the TD report said. “This changed in January when food prices decelerated in the U.S., but accelerated in Canada.”

Food prices in general are expected to rise three per cent this year, TD said, outstripping wage growth.

Researchers at the University of Guelph have detailed how much they estimate prices will rise for meat, fish, fruits and vegetables in a separate report last month.

MORE: Fresh food prices are spiking at Canadian supermarkets 

Personal care, clothing

Personal care and beauty products are expected to see perhaps the biggest jump in prices this year, according to TD, which predicts a six per cent jump in personal care products.

Clothing and footwear are also jumping in price – reacting to the loonie’s drop almost as quickly as food prices.

“Unlike most other manufactured goods, which are impacted by the exchange rate with a lag normally of four to six quarters, the impact on clothing and footwear tends to be immediate,” Petramala said.

Shoe prices rose at the fastest pace in 15 years in 2014, TD said – and the pace will quicken this year.

Furnishings

Your IKEA or Crate&Barrel trips are also getting pricier. Price increases for furniture lag other imported products, but they’re starting to turn up now and will continue to turn higher at various home furnishing retailers for the balance of the year.

“Much like clothing and footwear, prices of household furnishings also move closely with the Canadian dollar over time, but there appears to be a lag of up to two to four quarters,” the TD report said. Furniture costs are anticipated to rise a total of four per cent this year, half of that attributable the currency’s swoon.

Gas prices

Few products draw the ire and consternation of consumers like gasoline, which has moved higher since January while oil prices haven’t traded up nearly as much.

WATCH: How high will gas prices go?

Blame the loonie here, too. The currency swing is contributing to the wide gulf in savings U.S. motorists have seen versus what Canadian drivers are experiencing at the pump, with gas prices dropping 38 per cent in the United States versus 23 per cent in Canada, Petramala said.

“Part of the difference reflects higher taxes on gasoline in Canada, but some of the lesser drop will reflect the weaker Canadian dollar,” she said.

Wine, at least

Our taste for imported beer is also catching up with our pocketbooks. More than half of all beer consumed in Canada now is produced outside of the country, the TD report said, thanks in part to foreign takeovers of Canadian brewers.

“Historically, beer prices have not been highly sensitive to currency movements. However, the beer industry has changed considerably over the last decade, with the purchase of Canadian big beer makers by foreign companies. As of 2012, the majority of beer consumed in Canada was produced elsewhere,” Petramala said.

One positive note — the TD economist said the Canadian dollar hasn’t depreciated against the Euro or South American currencies, where most of the country’s wine is imported from.

“Thankfully, wine prices have yet to show any upward pressure,” the TD report said.

jamie.sturgeon@globalnews.ca

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