‘Time’s Up’ For Parity Pricing, Retailers Told

(Canada.com/Canadian Press)

U.S. goods remain 18% more expensive one year after dollars reached parity: study

Last year, when the Canadian dollar was nearing parity with American currency, Canadian retailers said they couldn’t create cross-border price parity overnight, that it would take time to adjust.

Well, a report from BMO Capital Markets yesterday said “time’s up,” with the Canadian dollar averaging 98.8 cents U.S. in the past year, yet the price gap remaining “extraordinarily large.”

The report, written by Douglas Porter, deputy chief economist for BMO Capital Markets, noted that a price comparison using a basket of various goods a year ago showed an average price gap of 24 per cent between Canada and the U.S.

Mr. Porter said a new comparison using the same sample of 17 items showed a differential of 18 per cent, with U.S. goods being cheaper. Adjusted for a Canadian dollar trading slightly below parity, the difference worked out to 16 per cent.

Products sold in Canada that made the most progress in coming closer to U.S. retail costs included automobiles, books and magazines.

“Those were the ones that everyone was focusing in on, really bringing pressure to bear on the sellers there,” Mr. Porter said in an interview.

Mr. Porter said some of the items in which significant progress has not been made are hardware, power tools and clothing. Why? Mr. Porter said one reason is retailers of these goods haven’t had their feet held to the fire as much as auto and booksellers.

Another factor, he said, is that U.S. retailers, for competitive reasons, have kept their prices low despite a falling dollar. As well, Mr. Porter said Canadian consumers have not been cutting spending as much as their U.S. counterparts, and this supports higher prices north of the border.

“I do believe this is as much a U.S. story as a Canadian story,” he said.

But Mr. Porter said Canadians would be wise to demand as competitive pricing as possible from merchants, given the inflationary threats that exist. Read more.

Related: Cross-Border Gap Persists