Falling Canadian dollar means there are bargains to be had, but not for long
Taking a shortcut through an underground mall yesterday, I saw a couple who looked like Pan Am visitors ogling the low price of jewelry outside a little downtown Toronto shop.
Normally, we think of U.S. prices being cheaper than anything you get north of the border. But something special is going on with some Canadian goods right now.
- Canadian dollar falls to lowest level since 2004
- Weak Canadian dollar gives visitors a reason to cheer
As the Canadian dollar trades at lows not seen since 2004, it means that this year’s July sales may offer the best bargains you will see in a while. But it will come at a cost.
Statistical quirk?
The latest plunge is in some ways a statistical quirk, as you can see in the graph below. By falling under 77.85 cents US — the low hit on March 9, 2009 — suddenly the loonie was worth less that it had been through all the oil-boom years of the 2000s.
The Canadian dollar is trading at lows not seen since 2004. (CBC)
While it may be just statistics, there is also a reason why that quirk may be significant to long-term pricing, ushering in a new round of sharply higher inflation.
Some goods, like fresh food and energy, can change on a day-by-day or a week-to-week basis. If there is frost in Florida, a shortage of oranges shows up in grocery store prices within days.
But for many other goods like clothes, jewelry, books, appliances and cars, prices are far less volatile, says Victoria-based retail consultant Richard Talbot.
Last year’s prices
In some cases, wholesale prices for goods already in the supply chain were set months ago. Mom-and-pop retailers especially will often set their markup on the wholesale prices they paid so that profit on current inventories will be calculated based on what they paid their wholesalers.
“Generally retailers order at least a year ahead of time,” says Talbot. “Until that stock is expended, the prices would remain much the same.”
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