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A price gap between Canadian and U.S. products has widened sharply with a surge in the loonie that should lower prices on this side of the border.
Prices on a selection of goods studied by BMO Nesbitt Burns are now an average 20.4 per cent higher than those of the same products in the United States, compared to a spread of less than 7 per cent in the summer of 2009.
The study by deputy chief economist Douglas Porter, released Thursday, showed magazines are 20 per cent higher, the book Moonwalking with Einstein 15 per cent above, a Blu-ray version of The King’s Speech 28 per cent, Crate & Barrel appetizer plates 11 per cent, Gap cargo shorts 15 per cent, running shoes a stunning 48 per cent, Titleist ProV1 golf balls 11 per cent, a Cannon Rebel camera just 2 per cent, the 8-gig version of an iPod Touch 24 per cent, and five car models 16 per cent.
The high dollar can do many things, Mr. Porter said in the report, which looked at what the loonie will buy in terms of U.S. currency, but it cannot equalize prices across the border.
“That more moderate inflation performance versus other countries is overwhelmed by the surge in the currency,” he said. “As a result, the cost of a basket of goods, adjusted for today’s exchange rate, has bolted higher again in Canada relative to the U.S.”
The loonie has gained more than 30 per cent over two years, pumped up by high commodity prices, the attractiveness of Canada, and the generally weakening of the U.S. dollar. And economists believe it’s going to stay strong for quite some time.
Here’s what the strong dollar does do, according to Mr. Porter:
Restrain inflation: “The strong currency rewards consumers first and foremost, by helping hold prices lower than they would be otherwise.” Inflation trends in Canada have dipped below those in the United States recently, Mr. Porter said, helping keep prices down.
Keep interest rates low: “With the Fed unlikely to start lifting interest rates for some time yet (we believe they will start in early 2012), and the currency on a roll, the Bank of Canada is constrained from lifting rates as quickly as they would like ... markets now seriously doubt if the bank will even begin hiking rates by July.”
Support business capital spending: “A common refrain amid the dollar’s rapid rise is that it will help Canadian business invest in new machinery and equipment, by slashing the price of imported gear. While the long-term evidence is not exactly obvious on this score, we did find some modest impact on real capital spending on M&E of a rising dollar.”
Pressure the trade balance: “The real trade balance responds very quickly to changes in the exchange rate, as a rising currency puts abrupt upward pressure on imports. While this effect is partly countered by the improving terms of trade, the shift in volumes tends to dominate. As a result, the current account balance, which saw an average deficit of 3 per cent of GDP over the past two years, is likely to remain uncomfortably wide, despite the run-up in commodity prices.” It won’t dissuade foreign investment, though.
Article provided via The Globe and Mail
http://www.theglobeandmail.com/report-on-business/canadian-us-price-gap-surges/article1985107/
" USD - U.S. jobless claims rise "..
" CAD- Factory sales dragged down by autos " ...
More people applied for unemployment benefits last week, the first increase in three weeks. Still, the broader trend points to a slowly healing jobs market.
The government says applications for unemployment benefits rose 27,000 to a seasonally adjusted 412,000 for the week ended April 9. That left applications at their highest point since mid-February.
Applications near 375,000 are consistent with a sustained increase in hiring. Applications peaked during the recession at 659,000.
The four-week average of applications, a less volatile measure, rose to 395,750. However, applications have dropped about 6 per cent over the past two months. At the same time, businesses have stepped up hiring.
Companies added more than 200,000 jobs in March for the second straight month, the first time that has happened since 2006. The unemployment rate fell to a two-year low of 8.8 per cent and has dropped a full percentage point since November.
However, a more sobering reason for the drop is that the number of people who are either working or seeking a job is surprisingly low for this stage of the recovery. People without jobs who aren't looking for one aren't counted as unemployed. Once they start looking again, they're classified as unemployed, and the unemployment rate can go back up.
The number of people collecting benefits fell to 3.68 million during the week ending April 2, one week behind the applications data. That's the lowest total since late September 2008.
But that doesn't include millions of people receiving aid under the emergency unemployment benefits programs put in place during the recession.
Over all, 8.5 million people received unemployment benefits in the week ending March 26, the latest data available. That's down slightly from the previous week.
Applications for unemployment benefits could rise further in the coming weeks due to disruptions from the earthquake and tsunami in Japan. Toyota said last week that it will probably be forced to temporarily shut down all of its North American factories. Nissan and Ford Motor Co. have said several North American plants would be closed for some of April.
Businesses in February posted the largest number of job openings in more than two years, evidence that hiring is picking up. Employers advertised 3.1 million available jobs that month, the most since September 2008, the government reported Wednesday.
Google Inc., electronics store hhgregg Inc. and Kohl's Corp. are among the companies that have announced plans in recent weeks to increase hiring.
Article provided via The Globe and Mail
http://www.theglobeandmail.com/report-on-business/economy/jobs/us-jobless-claims-rise/article1985144/
Canadian manufacturing sales fell in February by the most since August 2009, as auto sales pulled back after a surge in January and exporters continued to be hammered by the strong Canadian dollar.
Factory sales fell 1.5 per cent, Statistics Canada said on Thursday, following a 4.4-per-cent gain in January, revised from 4.5 per cent reported previously. Markets had expected a 0.2-per-cent dip in month-on-month sales.
Manufacturing, which relies heavily on the U.S. market, has reported a steady climb in shipments since mid-2009 but has yet to recover to pre-recession levels. In volume terms, sales fell 2.3 per cent in February compared with a 5.4 per cent gain in January.
Motor vehicle assembly plants saw sales tumble 10.9 per cent and the parts industry suffered a 7.9 per cent drop in February. Sales in the sector had jumped 26 per cent in January as many plants ramped up production after weather-related slowdowns in December Manufacturers’ inventories shrank 0.3 per cent in February, the first decrease in five months. New orders fell 2.6 per cent, while unfilled orders grew 0.4 per cent. The inventory to sales ratio – a measure of how many months it would take to exhaust stocks at the current sales pace – increased to 1.31 from 1.29.
Article provided via The Globe and Mail
http://www.theglobeandmail.com/report-on-business/economy/factory-sales-dragged-down-by-autos/article1985134/
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