Has the CDN dollar been affecting you?
 

I'm in the export business and watching the dollar's dramatic rise over the last year has not been a good thing for many of us.

I've come to respect the opinion of many of you on these boards and I'm curious to know where you think this will go. What do those of you who have been around longer then I have know about a strong dollar economy and what kind of impact it will have on manufactureres and exports.

I guess most FTs like the high dollar when travelling (which for some of you always seems to be the case), so let's not be too biased here.

I go to school in the United States and work in Canada during the summers, so the high Canadian dollar has done nothing but help me out in a BIG way. I think it kind of makes up for the 0.62 cent dollar last year http://www.flyertalk.com/forum/wink.gif

It is KILLING ME as I am paid in US $$$ My paycheque just keeps going down and down http://www.flyertalk.com/forum/frown.gif

I am no expert (by a long shot) but I would think that if the CDN $ doesn't weaken it will hurt our economy very badly as businesses such as yours start to lose business or do to lost competitive advantages of a week CDN $. I wonder if David Dodge might not cut interest rates again to help the the $ (depending on your point of view) but then there is inflation.

I can live with higher costs when traveling abroad as it is a luxury. Don't get me wrong, my pockets aren't exactly full of money especially as my paycheque drops almost every day lately.

My boss looked after me when we got to a 1.33 exchange but and I am sure he would continue to help out if the dollar keeps getting stronger but I would prefer to see it get weaker for our economy overall.

This has been incredible for the people who import my products as they kept their prices up at a 1.60 exchange rate and are making out like bandits but they haven't lowered their prices to push sales higher so the projected growth isn't enough to offset the increased cost to my company for my expenses. This explains why Cattle is on the road 4 weeks in a row this month as we head into last quarter (don't worry I was home weekends)

You might be able to get a better response from someone who is educated in economics but that is my 2 cents as someone who lives on the edge of the exchange rate as well.

How are you holding up Youponder?

We are feeling the effect of the stronger dollar in two ways.
Sales to US are in US dollars.The strength of Cdn dollar means I get less than expected.(forward dollar averaging here I come)
e.g. for every 100KUS in sales in March I received about 145KCdn.
The same exchange today means I get 133KCdn.
Huge impact.
On the other side,my equipment purchases from US (manufacturing equipment and trucks)are less this year than last year for the same equipment.
Travel costs to US will also be less.
Good time to buy equipment as Interest rates look to come down again.

I am in the same situation as cattle. I am paid in the US dollars and have watched my paycheck plummet by 18% since the beginning of the year.

On the business side I have been purchasing more product from US factories and less from Canadian factories.

Their several pieces in todays ROB on the dollar and the affect on the economy.
Bottom line is that Canadian business needs to increase productivity. Our southern neighbours increased productivity by 11% last year while we increased by 4% (if my memory serves be right). The majority of the productivty gains have been in new and more effecient equipment. The good news is that most of this equipment is bought stateside, so the weaker greenback lessens the price of this.
Anything I read says our dollar will climb to 80c within 9-12 mos. The Bush admin had made is fairly clear they are content with a weaker greenback.
My advice to exporters, FWIW, is try and streamline your operations as much as possible, look for ineffeciencies, fix them. This will help you now, and even more so if and when our dollar sags again.
IMO, low interest rates are here for sometime to come. Prime will likely stay around the 4.50% mark for the next 9 months. IMO, Dodge was too hasty in raising rates earlier this year, the lowered them more recently. I don't think he will lower again on October 15th, some people are calling for him to lower rates to lower the dollar. I think that Dodge has been seen to be too trigger happy on the rate button, he will want to sit out October 15th and see what happens with the dollar a little longer term (another couple of months)
I hope this all makes some sense. I'm sure some will agree and some will disagree. I am would be very interested to read other people's opinions.
I should also add, I do not have any institutional post secondary education in these matters. I have a keen interest in it though, read a lot every day, and my business involves a certain amount of fiscal forecast acumen.

I see I'm not the only one who got a thorough education on interest rates, currency devaluations and David Dodge's pipe smoking habits over the last year. Not too mention the seemingly odd things which make the dollar jump (usually) or slip (as they like to say) on any given day.

Taupo:

As far as the oft touted claim that we all have to "increase productivity" some times that just is not a possibility. Say there's an item that you purchase for $500CDN and you resell it for $400US, On Jan 1, 2003 that would have given you $588.75, today you would get $498.75CDN. That's a direct cost. Economists stopped insisting on increasing productivity when the dollar hit .70 or so. It's simply unprecedented for the dollar to rise so high so quick. No one can adjust their productivity that quick, if the were able to they would have done it long ago.

It's also claimed that costs will now go down as most products originate in US$ - that is true but Canadian dealers have yet to lower the CDN price to reflect this. For many items in the apparel or consumer electronics industry it is actually cheaper to buy US retail then Canadian wholesale - for the same item!

I'm holding up my completely changing my business plan. I'm not "increasing productivity," rather I'm closing one business and starting another using my knolwedge and experience from the first.

Essentially export CAN>US is not the smartest business to be in right now. The other way around or exporting to almost any other country is. It's just too bad the US is the single biggest market for most high-priced mass-produced goods.

Canada is an export economy - a high dollar affects us a lot more then a high US dollar does for Americans. Likewise a low dollar is proportionally more important to us then a low US dollar is to Americans. The Bank of Canada like to flaunt the Canadian economic numbers early in the yet while they raised interest rates - claiming we were outperforming the other G7 nations. May I venture to say it has nothing to do with us, but everything to do with out southern neighbors appetites for our exports. That kept the manufacturing and employment sectors on the up and up.

Now, that our export business is not as attractive, the Canadian numbers and inflation seem not to indicate the robust domestic economy the BOC and the Canadian patriots were so proud of. Why? All because of the dollar. I'm pragmatic enough to understand the Canadian economy is really just a blip in world affairs and everything that happens in the US economy is everything to us. That is what David Dodge did not understand and why he was wrong in raising rates while the US cut which led to the higher CDN dollar and thus lower productivity and everything else.

The US productivity increases came mostly from employers squeezing more hours out of employees not primarily from technological increases.

The dollar rise hurts, bigtime. On sales volume where my companies might have earned $15,000 to $20,000 in profit, we now can barely break even.
There is a silver lining in this situation, of course. We are tightening things up and finding better ways to handle our business. Also, for us at least, there is an 'inflection point' where we can simply switch sources/suppliers to the U.S. from canada, and maintain our margins and still serve U.S. clients. Not good for the Canadian economy, of course. I am quite puzzled why the bank of canada doesn't ratchet down the interest rates sufficiently to offset the US currency rise. With cheaper borrowing, businesses will be able to make the capital investments required to achieve efficiency, and slowing the rise of the Canadian dollar against the U.S. currency, would allow export oriented businesses like ours the time we need to adjust to the new circumstances.

Shouldn't this be restated in the reality of the situation? The US Dollar is being devalued by the Fed Reserve, but Bush and company can hardly be seen to be doing this, or acknowledging the US economy is in the bad shape it is in. It an sympathize with those why rely on export to the US. It shows the vulnerability of having an export-based economy that is so focused on a single market.

But what really burns me is how the NATIONAL PEST spent the past two years bashing the low value of the C$, and now that it is rising, they are attacking this movement as weakening our export position. As I have noted elsewhere, with certain media types there is no way you can get a break.

The C$ is not gaining against most other currencies, at least not that I have noticed. The £ and E are pretty stable, as are smaller currencies I often deal with like the SAfrican R$.

But I sell my TV programs in US$s, so the net return is dropping every day. And the cost to shoot US films and TV series in Canada will go up. Might actually help Arnold bring some of that runaway production back to LA. Illusional, but that's the overall Bush strategy for recovery it seems.

Still, I'm headed to Buffalo for wings at the Anchor Bar, so I guess it will be a little more affordable tomorrow night....

None of the following is actaully directed at you SH, just using your statement as a starting point for my next post http://www.flyertalk.com/forum/smile.gif

What the US does is up to them, how we respond is up to us and we have done badly in our response.

Productivity gains should be increased and I do not disagree with that. As has been said the rise in the dollar has been swift and high in a very short period of time. These gains will come which is good long term but once the fallout starts to trickle outwords our G7 economic outlook may not be so rosey. Short term vanity by the government for long term pain later.

These examples are from real people who state their real life situations which means real money not being put back into our economy. So it takes two or three quarters for it show up, who cares right? After all it's only numbers on paper, not really peoples lives http://www.flyertalk.com/forum/rolleyes.gif

As for prices not being reduced on US imports I can vouche for that. EVERY LAST DISTRIBUTOR (7 of the,) I have across Canada have not reduced their prices one penny. So any benefits of buying new machinery is going to have to come from savings via reduced interest rates. That arguement that "We lost for so long when the dollar weakend in 2001/20002" is lost on me as the gains made this year have been nothing short of incredible. I take the flack every day over this but as a US company we have not raised our prices to make more money so I have to pass the buck to my distributor. It is a no win situation when you talk to customers this way. They feel gouged by the product they are selling even if the price is not my fault. They associate the lack of price concessions with my company and thus are unhappy with me. It's not my fault, but it is my problem http://www.flyertalk.com/forum/frown.gif

I do the opposite. On two months earnings, I lost $450 US (that's one course for a student) while I was at my job. (Just under 10%)

I live in Canada, my hone is valued in Canadian dollars, my savings and investments are predominantly in Canadian $, my pension in in Canadian A$, so of course I would like the Canadian $ to be as high as possible - I look forward to the days when our dollar will be > US dollar. For those mercantilists who believe that we are better off with a low Canadian dollar, I suggest studying Argentina and ant other country whose currency has been devalued. The historical evidence is unequivical. Countries prosper when their currency have more value.

Well, I have mixed feelings right now because my 9 day stay in Maui will come in at around 1.35ish instead of 1.40ish and will save me about a $100 on my stay at the new Westin Villas.

Granted, for the typical Canadian who earns money solely in CDN$ a high dollar is a good thing, but you have to understand the Canada is an export economy. Comparisons to Argentina or the like are not valid - that was caused by severe economic conditions.
For most to continue and prosper in Candada would require for Canadian business did continue to have high growth and that can only happen if we can afford to sell out goods to the US.

As the dollar goes higher therein goes our most important source of productivity (namely exports) and our economy and GDP further plumets. Of course an odd side effect of that is that will likely cuase the CDN$ to fall all over again.

For the average Canadian resident I would say it's more important to have a solid backround economy then to have a high currency relative to the US. It's simply too narrowminded of a view to want a high CDN$. The BOC originally viewed it as a source of pride but are not naive enough to ignore the low dollars enourmos impact on our unique economy.

Youponder.

I am in neither the manufacturing, nor exporting business. I only know what I read. I sympathise with you, SH, Cattle and co who have your livelihoods or a part of, at stake.

You echoed my sentiments on Dodge and his triggerhappiness. I think he has gotten over this now, therefore will not lower rates October 15th, wager anyone? A brew in YYZ, YYC, YVR or YYF.