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As Canadian Dollar Drops, Concerns Rise for Local Economy

Value of Canadian currency hits six-year low, raising possibility that visitor spending will wane in Northwest Montana

By Dillon Tabish

A family from Alberta visiting Montana this week would need to exchange $131.22 Canadian for $100 U.S. dollars.

The tumbling value of Canada’s currency is coming into perspective, for both those who frequently flock to this corner of the state and local businesses that have relied on visitors from up north as vital economic buoys.

Plagued primarily by plummeting oil prices, the Canadian dollar — the loonie — reached its lowest value in six years in recent days, trading on the global market for barely 79 cents U.S.

»»» Click here to view a conversion calculator showing the exchange costs for U.S. and Canadian currencies.

A year ago, anxieties were already rising after the loonie dipped below 90 cents for the first time since mid-2009.

Now a series of events are compounding the situation up north, raising concerns that the country, or at least the province of Alberta, could be sliding back into a recession. Falling oil prices have created a ripple effect for an economy closely tied to oil values. Last week the Bank of Canada dropped the country’s lending rates in an attempt to offset the shock of sagging oil prices. Meanwhile, Prime Minister Stephen Harper, facing re-election this year, has said he intends to achieve a balanced budget by spring, meaning decreased government spending and the likelihood that there will not be any potential stimulus packages to aid the economy in the near future.

As a result, the loonie is expected to keep dropping in value through spring and potentially summer, and analysts are predicting it could reach as low as 75 cents U.S., foreshadowing a potentially massive deterrent for Canadian visitation.

So what does that mean for places like the Flathead Valley, which have relied heavily on Canadian visitors and second homeowners as economic cornerstones?

“Canadians will still come if there’s something they want to do down there. But the spending is not going to be what it was,” said Canadian economist Donna Townley, an instructor at the University of Lethbridge in Alberta. “People are going to change their spending habits. They definitely will want to come for the weekend but they’re going to have to reconsider what they’re going to do.”

She added, “It is going to impact the valley.”

More than 913,000 Canadians visited the state annually in recent years, collectively spending $275 million on average, according to government data.

Concerns about reduced Canadian spending cast a cloud over this week’s annual Flathead Valley Economic Forecast event at Flathead Valley Community College.

Brad Eldredge, director of Institutional Research, Assessment and Planning at the college, described the situation as one of the largest risks facing the local economy in 2015.

Eldredge said the valley experienced slower employment growth last year of roughly 0.6 percent. Projections are that the county will see 1.7 percent job growth in 2015, although several risk factors could deflate gains, including uncertainty in the national economy and rising interest rates that could affect the real estate market.

“I see slow, steady broad-based growth continuing (in 2015),” he said.

Yet the Canadian factor looms large.

Eldredge said the Flathead Valley has developed an important relationship with Canadians, especially during the recession when the loonie traded high and visitors increasingly traveled to nearby border towns such as Whitefish and Eureka.

On the flip side, gasoline prices are the lowest in over five years, and Eldredge said this could fuel greater tourism in the U.S., benefiting popular destinations like Northwest Montana, where Glacier National Park is a significant attraction.

“Gas prices are extremely low and that should help tourism. It makes it cheaper to drive here and hopefully fly here,” he said.

“But as the American dollar continues to go up, that could hurt the (tourism) industry in terms of international visitors.”

The declining Canadian dollar could also impact the local construction and real estate industries, which have been aided by second-home buyers or retirees from up north.

Chuck Stearns, city manager in Whitefish, echoed Eldredge’s assessment.

“Canadian investments have really helped us. I’m a little concerned about the Canadian influence now,” he said. “We may see a lot of Canadian investment that helped us in the past years dry up a little bit.”