4 Reasons For Canadians To Love The Low Loonie
There’s no question that a low loonie creates economic challenges and negative effects on consumers, particularly for those travelling south this winter, but there are positives too. Obviously, the dipping dollar is good for exporters—the lower the dollar, the cheaper it is for other countries to buy the stuff we produce. We spoke to Sherry Cooper, chief economist at Dominion Lending Centres to give us some silver-linings to the low loonie situation. She says that the state of the Canadian dollar should also help stimulate job growth, increase stock prices and help the broader economy. Here are four reasons to love a low loonie:
1. Tourism will be booming
It will take time for the benefits of the lower loonie to trickle down to the manufacturing sector, but one area where it could have almost an immediate impact is on tourism. “Americans would almost certainly find Canada attractive for tourism and shopping,” says Cooper. The timing is certainly good since Canada’s starting to look cool again to foreign markets. The New York Times recently released its list of52 places to visit in 2016 and Toronto comes in at No. 7. It’s also a great time to be a tourist in your own country, since it’ll be a lot cheaper to vacation in Banff than take a trip across the border.
2. Deals galore—at least for now
Given the volume of imported goods we consume in Canada, Canadians should brace themselves for higher prices at the register—but just not yet. According to Cooper the full effect of the decline in the dollar hasn’t appeared on store shelves for imported goods. This will change as inventory turn over, but as stores clear out merchandise, especially in the post-holiday shopping period, Canadians are getting unprecedented deals on imported goods. For example, the CBC reports that a Honda Accord is currently $5,700 cheaper in Canada than it is in the States. And if you’re in the market for a flat-screen TV, it’ll probably be a lot less pricey here than in the U.S.
3. U.S. investments are winning
Canadians who have been wise enough to shrug off the home-country bias and invest in U.S. equities in recent years have reason to celebrate. Not only have U.S. equities vastly outperformed Canadian stocks, the falling loonie has been giving investors an added boost if they convert their U.S. holdings back into Canadian dollars. The effect has been pronounced. In 2015, S&P 500 lost 5.7% over the past 12-months, but the fact the Canadian dollar has slid 15% relative to the greenback means Canadians who bought the index enjoyed a 12.6% gain. Unfortunately, as Cooper notes, more Canadians tend to invest domestically.
4. Good news for real estate investors
Canada has already seen more than its fair share of foreign interest in our real estate market, but the cheap dollar could help fuel that interest even more, says Cooper. Some of this increased demand will be from Americans buying vacation homes, while others will look to Canada as a place to invest. “Canada is seen as a safe haven for foreign capital so this helps to further encourage it,” she says. This isn’t good news if you’re in the market for a new home, but it is good news if you have already invested in real estate and are able to capitalize on higher sales prices. Enjoy.
Note: This article was first published on MoneySense Blog