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Lower Canadian Dollar Dampens Cross-Border Shopping

In early 2013 the Canadian dollar was trading approximately at parity with the American greenback.  Then the Loonie started a gradual descent to its recent level of 81 cents US.  A 20% depreciation of the Canadian dollar vis-à-vis the US currency has significantly changed the relative prices of traded goods and services.  Many exports from BC shipped into the US are suddenly more competitively priced. The opposite is true for imports coming into the province from the US. 

Cross-border shopping effectively amounts to individual consumers doing their own “importing.” With the devalued Canadian dollar adding an additional cost of 20% (and more after paying fees to convert currency), a large portion of the savings on items purchased stateside that existed when the Canadian dollar was at parity has now been eliminated. So the number of British Columbians venturing into the US, unsurprisingly, has diminished.

Highlights

  • The fall in the value of the Canadian dollar, unsurprisingly, has led to a decline in the number of British Columbians making short-duration visits to the United States.
  • The number of same-day border crossings by British Columbians started to fall in 2013.  Same-day trips are down 148,000 compared to the peak registered in early 2013; this represents a 28% drop. 
  • Trips to the US lasting two or more days have also been affected by the slumping Canadian dollar and are down 23% from their most recent highs.
  • Fewer visits to the US means that BC consumers are spending a smaller fraction of their household budgets south of the border.  This is one factor behind the pick-up in retail sales in the province.
  • The steady decline in cross-border trips since early 2013 also coincides with a rise in the volume of gasoline purchased in BC. This is noteworthy because when border crossings were rising, gasoline sales in BC were trending down; now, they have clearly turned higher.