By Steve Guntli
For the first time since 2009, the Canadian dollar has fallen below 80 cents and the months-long decrease in value has had an impact on cross-border shopping in Whatcom County.
The loonie has gone through some dramatic shifts in the last month. On January 21, the Bank of Canada lowered the benchmark interest rate from 1 percent to .75 percent, one of the factors behind the currency’s drop to 81 cents on the U.S. dollar. On January 26, TD Economics released a study predicting the loonie would fall below 75 cents by 2016.
As of February 10, the loonie was down to 79.3 cents on the dollar, a drop of 7 cents in the last month. At the end of 2013, the Canadian dollar was worth $0.94 U.S.
The declining price of crude oil and the strength of the U.S. dollar are two factors behind the decline. Worldwide oil prices are currently around $52 a barrel.
According to a study by the Vancouver Sun, cross-border trips into Whatcom County through the Peace Arch crossing in December 2014 were down 7.6 percent from December 2013, when the loonie was valued at 94 cents on the dollar.
Jim Pettinger, president of Ferndale-based International Market Access, Inc. deals extensively with cross-border commerce. He believes the decline in the Canadian dollar is already having an impact on Whatcom County retail sales.
“Costco is noticeably less busy, as is the airport,” he said. “An added factor is that, while gas is still cheaper in Whatcom County than in B.C., the absolute cost in B.C. is low enough to make a gas trip less appealing. I believe Whatcom County needs to understand that the Canadian dollar at par or above is not the long-term standard.”
While the drop may be affecting retail shopping in Whatcom County, Pettinger sees some potential benefits.
“I see two benefits. One is that travel to B.C. by Whatcom County residents for tourism and purchases is much cheaper. A trip to Whistler may be much more workable. I know of someone who is pricing a flight to Rome and finds the cost from Vancouver much less than from SeaTac,” he said.
“The second benefit is that selling in the U.S. market is now much more appealing for Canadian businesses, whether they make their goods in Canada, in the U.S. or import them. Whatcom County needs to make sure these businesses invest and create local jobs rather than make the assumption they need to be in Seattle or elsewhere.”
According to Pettinger, many Canadian companies are considering expanding their businesses into Whatcom County, an attractive prospect since they will be paid in American currency.
“Now is a great time to invest, but only if the investment will produce increased sales in U.S. dollars,” Pettinger said.