Sunday, October 26, 2008

Dropping dollar won't raise most consumer prices until new year

Dropping dollar won't raise most consumer prices until new yearRetailers aren't expected to raise their prices to match current exchange rates until the new year.(Adrian Wyld/Canadian Press)

Canadians can expect to find bargain prices for consumer goods through the holiday season before retailers readjust their prices in line with the falling value of the loonie, retailers and analysts say.

"The costs that [the retailers] incurred for their holiday merchandise were incurred months ago so those are loaded and locked and won't change for the holiday season," said Peter Woolford, a spokesman for the Retail Council of Canada.

In fact, some retailers say they're dropping their prices in response to flagging consumer confidence. In mid-October, the Conference Board of Canada reported consumer confidence had dropped to its lowest level since 1982. On Friday, the Canadian dollar opened at 78.65 cents US, down 0.99 cents from Thursday's close.

"With consumer confidence, I think the last report said it was at its lowest point in a couple of decades — if anything, we're lowering prices," said Vincent Power, a spokesman for Sears Canada.

When the dollar achieved parity with the U.S. greenback in September 2007, many consumers called on retailers to lower their prices to reflect the true value of the dollar. Large manufacturers introduced discounts in a bid to keep shoppers from heading across the border, while smaller companies assured consumers they would introduce discounts once they had moved through the stock they had purchased before the loonie's surge.

'We said we really can't continue this model of par pricing because we'll just go out of business.'— Christopher Smith, bookseller

Christopher Smith, an Ottawa bookseller, matched the American sticker prices when the loonie surged. But he was forced to adjust his prices when the loonie began to slide.

"We said we really can't continue this model of par pricing because we'll just go out of business," he said.

But Smith notes Canadians are still enjoying bargain prices.

"If a book is $29.95 US it is probably selling for about $31.95 Canadian," he said. "But if you did today's exchange rate it actually should be $38 or $39.95, so it's a real deal."

Paul McNally, co-owner of McNally Robinson bookstores, said most books have already been printed in anticipation of the busy shopping season.

"They're already pre-priced and they're already pre-costed," he said from Winnipeg. "There's no way that because the exchange rate did something overnight, that everything in a publisher's warehouse and everything on a bookseller's shelves is going to change."

Charmaine Buskas, a senior economic strategist at TD Securities in Toronto, said this pattern will hold true for a number of retailers.

"It's going to be a little bit difficult for retailers to take prices back up now that the currency has swung the other way," Buskas said.

"We do think there's going to be a little bit of a carryover or a lag effect such that Canadian consumers might be able to benefit from some of the lower prices that we saw last year."



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