Higher dollar? Canadians still paying more than Americans for the same goods
Canadians are paying 20 per cent more on average than Americans for identical products even though the value of the loonie has soared to three-year high above the U.S. greenback, according to according to a recent study by BMO Nesbitt Burns.
That difference was only 7 per cent when the firm conducted a similar study in July 2009, even though the loonie was trading around 92 U.S. cents at the time.
This only confirms what most of know already. Nearly four years after the dollar first hit parity, we’re still paying a big premium on imported goods.
“There has been precious little movement in underlying relative prices in the past two years despite the currency’s record sprint,” Porter says.
But is it that simple?
The American market for consumer goods is quite simply more competitive than in most other countries, Canada’s included, Porter points out. And most Canadian retailers face higher tariffs and taxes compared to their U.S. counterparts.
Some retailers are restricted by contracts under which manufacturers dictate what they can charge in Canada. This so-called 'country pricing' can really make a difference, says the Retail Council of Canada.
But Bruce Cran, head of the Consumers’ Association of Canada, feels this is a bogus argument: “The very simple solution is greed on the part of Canadian retailers. They refuse to pass on the savings,” he told the Financial Post.
"The way we see it, we've been virtually at parity for four years and Canadian consumers have every right to expect more equity in the prices between Canadian and U.S prices," he says.
With just about every economist agreeing that the loonie — fueled by surging commodities prices, a retreating U.S. dollar and the widespread belief that Canada is a financial safe harbour — will stay comfortably above the U.S. dollar for some time to come, this issue isn’t about to go away anytime soon.
How are you taking adavantage of a higher loonie? Have you quizzed local retailers on the topic? How did that work out?
By Gordon Powers, MSN Money
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