Plunging loonie impacts local economy
The Canadian dollar last week hit its lowest value in more than a decade, creating more worry for retailers along the border and in Maine tourist destinations, which grappled with a widening exchange rate through the last year.
The forecaster who anticipated the loonie’s drop to 70 cents to the dollar this week predicted the Canadian currency would fall to 59 cents against the U.S. dollar by year’s end.
“Things get weird under 80,” Greg Dugal, executive director of the Maine Innkeepers Association, said.
There’s no good gauge for measuring how the exchange rate disparity has affected business in Maine so far, according to state economist Amanda Rector.
“Even with the exchange rates at the levels they are now, in many cases it’s still cheaper for [Canadians] to come here and buy whatever particular goods they’re looking for,” Rector said. “It might not have as much of an effect as you might think.”
At Marden’s in Houlton, Maria Fullerton of Woodstock, New Brunswick, was heading into the store to shop for supplies she said she could get cheaper in the U.S.
“It is only a 15- or 20-minute trip across the border from my house,” she said. “With the loonie the way it is, you can sometime find better deals here in the United States.”
Even with the poor exchange rate facing Canadians, the lower U.S. prices at the pump still draw many drivers to gas stations in U.S. border towns. Gasoline stateside was about $1.60 (U.S.) cheaper than the average in Canada on Jan. 14, according to price tracking website gasbuddy.com.
In Madawaska, a cashier at Bob’s Service Center said there has been no discernible decline in Canadian customers. Several customers from just across the St. John River in New Brunswick, regularly cross the border to buy staples such as milk and bread, she said.
But the sagging Canadian economy has hurt some Maine retailers. In Fort Kent, Canadian shoppers at Paradis Shop ‘n Save are limiting their shopping to specific items, such as dairy products, that are cheaper on this side, according to Craig Paradis, one of the family owners.
Business overall has been down as a result.
“We have seen a change,” Paradis said by phone. “We are down about 15 percent.”
When will it end?
In Houlton, Woodstock resident John Gates was headed into Andy IGA to shop.
“My wife is over here at Marden’s, and I am just going to pick up a few groceries that we can buy cheaper in the U.S.,” he said. “We have been facing the situation with the falling loonie for more than eight months now. I don’t know when the value is going to rise again.”
Neither do currency analysts.
The loonie was at its lowest level in 12 years Jan. 14, 2016, hurt by the continued fall of oil prices. The situation has prompted a growing number of analysts in a Reuters poll to speculate that Canada’s central bank could cut interest rates at its Jan. 20 meeting, a move that would put pressure on the loonie to fall further against the dollar.
Retail sales from areas around border towns and Bangor since 2007 have tended to ebb and flow with the exchange rate. So have passenger vehicle entries to Maine at Canadian border crossings.
But those numbers are the result of more than just the value of the loonie, with dips in passenger travel and sales that coincide with the Great Recession.
“You’re going to capture all of the different things that are going on in the economy and not just the exchange rates,” Rector said.
St. John Valley Times writer Don Eno and Bangor Daily News writers Dawn Gagnon and Jen Lynds contributed to this report.
