Loonie tunes part two
Previously, I chided Stephen Poloz for having exporters too much on his mind as governor of the Bank of Canada. It would seem that he’s driven down the C$ to help exporters yet export sales have not risen to any great extent. In fact, the number of manufacturing firms is dropping all the time. Over the last ten years Canada has lost more than 10,000 manufacturers. Even at a modest 10 employees per plant that’s 100,000 jobs no longer tied to exports.
Moreover, most Canadians don’t work in export businesses. About 80 percent of all Canadian jobs are in service roles such as real estate, education, finance and healthcare. A typical success story in the services sector is GoodLife Fitness that employs 14,000 people. Not too many manufacturers can match that.
Consumer spending accounts for three-quarters of our economy. Automotive sales are an important component. The weak Canadian dollar is beginning to cause sticker price increases. “US-based products have become unnaturally expensive,” said Fiat Chrysler CEO Serge Marchionne a few days ago. Resulting price hikes on Fiat/Chrysler vehicles sold in Canada have meant fewer sales .
I buy more books than cars but the weak loonie hits me, too. I just bought Larry Tye’s Bobby Kennedy. The U.S list price is $32; in Canada it’s $42. To rub salt into the border, Barnes & Noble sells the book online for $21.20, or 34 percent off. Chapters/Indigo’s online price is $35.09, a puny 16 percent reduction. Stephen Poloz can’t do much about our uncompetitive retail environment, but he can boost the C$ back closer to par if he chooses. He’s scheduled to deliver a speech in Vancouver tomorrow. Is it too much to hope that he’ll have something to say to the average Canadian who’s getting hurt by the low loonie?