Increasingly, Canadian households are taking advantage of our strong dollar by choosing to “buy American.” It’s a trend that is causing concern amongst many Canadian retailers and tourism providers.
According to Statistics Canada data on international travel accounts and receipts and payments released today, the deficit narrowed somewhat over the last quarter of 2011, but it increased 2.1 per cent over the first quarter of 2011. So, in total, Canadians spent about $4 billion more outside of Canada than foreigners spent here.
Cross border shopping is likely contributing to the rise in the deficit, with Canadians taking day-long shopping trips. It’s a situation that may get worse before it gets better. The federal budget passed in March foresees an increase in the duty-free limit of purchases from $50 for a 24 hour visit to $200. And if you stay over 45 hours the limit will be raised from $400 to $800.
Cross border shopping is more prominent in eastern Canada.
The tourism industry right across the country is also impacted by the high dollar. It makes it harder to attract foreign tourists and international vacations are suddenly cheaper for Canadians.
What the Bank of Canada no doubt wants to see is higher imports related to capital spending to help improve Canada’s lagging productivity. In the meantime, Canadian retailers and the tourism industry will fight to get households to “buy Canadian.”
(This column is provided by the Troy Media Corporation.)