How the weakening loonie is about to make life more expensive
When this sentence was written, the value of the Canadian dollar was hovering around 92 cents U.S. That’s the lowest the loonie has sunk since the first year of the financial crisis. For people who happen to have a lot of U.S. dollars on hand, this is a godsend. (Canadian businesses that export to the U.S. are in for a particularly good time.) For everyone else, the prognosis isn’t as great. Here’s a quick tour of some of the probable consequences.
1. Uncertainty will reign
The general consensus among experts is the loonie’s decline will continue, at least for a little while, but nobody is sure where rock bottom lies. The price change is being driven by so many different factors—a stronger U.S. economy, a not-quite-as-strong market for Canadian resources—that all we really have to go on are the best guesses of investment bankers. As of November, Goldman Sachs was thinking we’d sink as low as 88 cents. At this rate, the loonie could be there before long.
2. Cross-border shopping will definitely be more expensive
The days of Buffalo shopping sprees could be coming to an end. Losing 10 per cent to an unfavourable currency exchange is enough to wipe out any savings that might result from a cross-border trip—especially considering the price of gas and tolls.
3. Warm-weather vacations could be more difficult to afford
Flying south for the winter has never exactly been cheap, but a weak loonie means those tour packages could go up in price. Even Caribbean vacations could be affected, because flights and hotels are often priced in U.S. dollars. According to the Star, at least one travel company is already planning to hike its rates.
4. Some groceries could get a little more pricey
Any foods that are imported from the U.S. will become more expensive if the loonie continues to weaken. Experts say fierce competition among grocery chains will insulate consumers from sudden price changes, but a steady rise is inevitable if things remain as they are.
5. Egos will deflate
There was something ennobling about having currency that was valued on par with the U.S. dollar. Canada is the smaller part of so many side-by-side comparisons with its neighbour to the south, but this one measurement of relative national success was different, for a little while. Fortunately, the Canadian ego isn’t prone to massive swelling (except maybe when it comes to hockey), so the comedown should be manageable.