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  Comments (2) Total Thursday Apr. 24, 2014
Canadian Dollar Dips as U.S. Economy Rebounds
Lowest value in nearly five years prompts concerns over visitor spending in border communities
File photo by Lido Vizzutti | Flathead Beacon
Two weeks ago, the sagging Canadian dollar reached its lowest value in nearly five years. The loonie slid to 89.35 cents U.S. in the final week of January, 10 cents lower than nine months ago and the first time it dropped below 90 cents since mid-2009.

The declining value of Canada’s currency has prompted questions and concerns about its ripple effect on communities like Whitefish and others near the border that have relied heavily on Canadian visitors and second homeowners as economic cornerstones.

But fear not, according to Canadian economist Donna Townley.

“The Canadian dollar’s bottom isn’t falling out,” she said last week. “We’re still coming down to Montana.”

Townley, an instructor from the University of Lethbridge in Alberta, has focused her research in recent years on the economic relationship between Northwest Montana and Canada. Though the recent fluctuation in value should not trigger any serious fears among local business owners, she acknowledges that her countrymen have been spoiled with an outsized loonie that has spiked tourist spending.

As the U.S. emerges from the Great Recessions and strengthens its own economy, Canada’s dollar is destined to drop, she said. But even so, the consumer prices and taxes up north still make Montana a favorable destination, and Townley doesn’t foresee a significant decline in non-resident spending in 2014.

“We were spoiled when (the loonie) was at 98 cents. But even down to 92 cents or a little lower, we’re still coming because of price differences and because it’s Montana,” Townley said. “It’s majestic Montana. There’s skiing. There’s boating. There’s lakes. There’s Glacier National Park. We’re still going to come down for all of that.”

Townley estimates the loonie would need to sink below 80 cents U.S. before Canadians might be seriously deterred from traveling over the border to shop. The overall cost of Canadian consumer goods like produce and retail items has increased roughly 10 percent in recent months due to the weakening loonie. At the same time, Canada’s harmonized sales taxes contribute to even steeper costs. British Columbia has a roughly 12 percent sales tax, Alberta’s is 5 percent and Saskatchewan’s is 10 percent.

Canada’s currency enjoyed a slight uptick in recent days, particularly after the country’s latest government report produced better-than-expected news about job growth. Its unemployment rate dropped from 7.2 percent to 7 percent, leading the loonie to rise a half cent Feb. 7.

In January 2013, the Canadian dollar averaged at 99 cents U.S., according to the Bank of Canada. Over last year it dropped 10 percent in value.

The latest estimates are that the loonie will hold at roughly 91 to 93 cents U.S. in 2014, Townley said.

“That’s still very, very strong and that will still bring the tourism. That will still bring the Canadians,” she said.

For years, the U.S. dollar towered over Canada and Americans enjoyed the high conversion rates that made visiting the country extremely affordable and attractive. But during the recession years, the loonie strengthened considerably.

In 2012, when the loonie traded almost on par with the U.S. dollar, roughly 1.5 million Canadians crossed into Montana through one of the 13 border stations, according to the latest figures from the U.S. Department of Transportation. That amounted to almost 10 percent of the 10.8 million visitors who spent roughly $3.3 billion that year, according to the University of Montana’s Institute for Tourism and Recreation Research.

The Canadian buying power extends beyond tourist dollars though.

Between 1984 and 1999, Canadians bought 221 homes in the Flathead Valley. In 2012, they purchased 225, according to Kim Morisaki with Montana West Economic Development.

Morisaki gave a presentation at the recent economic outlook breakfast highlighting the strong Canadian presence and influence in Northwest Montana. MWED staff compiled the data with Townley, local appraiser Jim Kelley and Flathead County staff, and as it shows, Canadians are tied closely to Montana’s economy.

Morisaki estimated that last year’s lower percentage of Canadian home purchases was due to a considerable increase in overall sales.

“We may have hit the peak,” she said. “Canadians have slowed down on their purchasing. But even with a slightly weakened dollar we expect they will continue to buy here.”
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