Canadians continue to pay significantly more for consumer goods than Americans, despite a high-flying loonie that is expected to float higher than the greenback for months to come.
A new analysis by a Bank of Montreal economist predicts that the Canadian dollar will remain above par until at least the end of 2012, if not longer.
The BMO report authored by Douglas Porter says "Canadians should get accustomed to a lofty loonie," which will restrain inflation and dampen the prices of imported goods.
But the climbing currency has yet to close a price gap with the United States, which may leave Canadians scratching their heads as to why they have to pay more for the same consumer items.
In an interview on Thursday morning, Porter said the discrepancy should ease off with time, as the Canadian dollar stays above par.
"The longer it stays above parity, the more we're going to see that price gap slowly but surely get whittled away, but I would emphasize slowly," Porter told 麻豆影视 Channel from Toronto.
The BMO report calculated that a basket of representative goods sold on both sides of the border cost Canadians an average of 20.4 per cent more than their neighbours to the south.
Sample items included a pair of cargo shorts sold at the Gap, which were priced 15 per cent higher in Canada, as well as a Blu-Ray copy of "The King's Speech," which was 28 per cent cheaper in the U.S.
Titleist golf balls, Canon Rebel cameras and running shoes also cost Canadians more.
Marketing analyst Lindsay Meredith said that if retailers can't get their prices down in Canada, "they're just going to lose a lot of business to the American guys who are going to have a field day picking up the action."
Bruce Cran, president of the Consumers' Association of Canada, complained that retailers have failed to adjust to having the two currencies close to par.
"I'm amazed at how long this is going on," Cran said. "Canadian retail doesn't seem to match up to any kind of reality. We're being gouged as consumers."
According to a survey by his organization, the average price gap may be closer to 30 per cent.
Retailers insist they're not cashing in, and say that slashing prices isn't an option. Rent and staff have to be paid in Canadian dollars. There are also tariffs and duties in place to protect Canadian manufacturers.
Porter said that a high dollar means that Canadian distributors and retailers have to pay more to bring in goods and get them out to consumers.
"A lot of those costs are in Canadian dollar terms and they aren't going to change just because the Canadian dollar has changed," Porter said.
Another reason the American economy breeds lower prices is that it's "probably most competitive in the world," which forces businesses to fight for every customer, Porter said.
"Companies around the world want to increase their market share as much as possible in the U.S. and they will be incredibly competitive in the U.S.," he said.
The bottom line is that the exchange rate is apt to change much more quickly than consumer prices, Porter said.
"Some of it goes back to what the market will bear, but the overwhelming story is just the big swings in the exchange rate that really do push around these price differentials," he said.
With a report from CTV's Atlantic Bureau Chief Todd Battis and files from The Canadian Press
