The rapid fall of the Canadian dollar alongside plunging oil prices is hitting Canadians hard, with a marked increase in the cost of imported goods forcing households to reduce spending. At parity with the US greenback from 2010 to 2013, the Canadian dollar has lost nearly a third of its value since then, falling below 70 cents last week for the first time in more than a decade.
The plummeting "loonie," named after the bird that appears on the Canadian dollar coin, has closely followed the drop in commodity prices, notably oil, which was until very recently the country's main export product. Crude prices have fallen below US $30 a barrel, after reaching new highs above $100 in 2014. Meanwhile, Canadians are paying more for fresh fruit and vegetables imported from the United States, and winter vacations to equatorial hotspots. And they can expect more steep price increases in other areas soon, including likely for hockey tickets, with no bounce expected in the currency for the foreseeable future.
In 2015, food prices rose faster than inflation for a fourth year in a row, with an increase of four percent, according to a study from the University of Guelph in Ontario. Vegetable price increases hit 10 percent, while the prices of fruits and nuts rose nine percent. Overall, Canadians spent Can$325 more at checkout for groceries in 2015 than the previous year, and according to the University of Guelph study, food prices are forecast to rise another four percent this year.
And there's little way around it. "Of all the fruits and vegetables (Canadians) consume, 80 percent is imported," explained Sylvain Charlebois, one of the study's authors. Canadian prices for fresh vegetables have skyrocketed in recent months after local harvests - the last one usually in September or October - were eaten up.
The phenomenon was illustrated in a National Post editorial cartoon last Thursday showing a couple at a bank asking for a loan to buy cauliflower. The price of this vegetable has quadrupled in recent months (also partly due to supply shortages in the United States), costing as much as Can$8 in some Canadian cities. The devaluation of the currency has also hit Canadians' vacation plans, with many choosing to stay home instead of flying south for a splash of sun and warmth in the southern United States or Caribbean in the dead of winter.
That might normally mean less empty seats at Canadian hockey arenas, except that tickets for hockey games are likely to rise too, because National Hockey League teams pay their player salaries in US dollars but the seven Canadians NHL teams earn their revenues in Canadian dollars. Canadians won't be out of the woods anytime soon, warned economist Hendrix Vachon of Desjardins bank. He is predicting a widespread price increases going forward, including for clothing and electronics.
In 2015, he pointed out, the Canadian dollar depreciated "against all other currencies of developed countries," a dozen in all, from the Chinese yuan to the South Korean won, and the British pound to the euro. In the short term, there is hope that a recovery in the United States - Canada's neighbor and biggest trading partners - will bolster the Canadian economy and currency. Vachon said the loonie could rise to US $0.75 by the end of the year, if that happens.
Others, however, are more pessimistic. Macquarie Bank, for example, is expecting the loonie to continue its slide all the way to US $0.59 in the coming months, which has not happened since Canada began floating its currency in 1971. That may be a boon to Canada's local tourism industry - bringing more Americans north to Canadian hotels and ski resorts - but it would entail further hardships for most Canadians. "It is well known, the misfortune of some makes others happy," Hotel Association of Greater Montreal chief executive Eve Pare told AFP.
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