Page 16 - Flathead Beacon // 9.2.15

NEWS
FEATURE
FOTOLIA.COM
Drop in Canadian Dollar Affects Local Retail
Fewer Canadians likely to make purchases other than just essentials, economists say, as oil prices weaken
BY MOLLY PRIDDY OF THE BEACON
In the past few years, ever since the recession dominated the Flathead Val- ley, it wasn’t unusual to see rows of cars and trucks with Alberta license plates in the Costco parking lots.
Lately, the Canadian license plates are still there, but they are less of an occur- rence, as the Canadian dollar continues to weaken compared to the U.S. dollar.
As of Aug. 31, the U.S. dollar was worth $1.32 in Canadian currency, the strongest the American dollar has been in at least five years. And while that may prompt more American spending in Canada, in the Flathead Valley, it will likely mean less spending from our neighbors to the north.
“The Flathead is still going to get tour- ists and homeowners, it’s just a little bit less at the moment. (Canadians are) still coming down the same amount but not spending as much,” Donna Townley, an economist at the University of Leth- bridge in Alberta, said.
It’s Newton’s third law of motion: for every action, there is an equal and opposite reaction. While the law is one of many governing the world of physics, it’s also an apt way to look at the recent plummeting of the Canadian dollar, as the U.S. dollar continues to surge.
The Canadian dollar is tied to the com- modity market, unlike the U.S. green- back. So when oil prices began falling this summer, dipping below $40 a barrel for the first time since 2009, the Loonie followed suit.
Patrick Barkey, the director of the Bureau of Business and Economic Research at the University of Montana, said the drop in oil prices is the second gut-punch the Canadian dollar received, since the price for natural gas is also low.
“Oil is just the second shoe to drop there,” Barkey said.
And since the Canadian oil projects are in sands, and not in traditional shale, their projects can’t ramp up and down as quickly, he said.
“They have some really big bills that need to be paid and they’re selling into a terrible environment from a seller’s point of view, so it’s going to be pretty painful,” Barkey said.
Already, some of the oil companies in Canada are cutting back. In March, Schlumberger, one of the world’s largest oilfield services and equipment compa- nies, closed its operations in Medicine Hat, Alberta.
And with the first New Democratic Party (NDP) premier in Alberta in four decades, portfolio managers and
energy-industry analysts urged investors to steer clear of investments in oil sands developers and coal producers in Alberta, according to Bloomberg Business.
“Calgary is very, very nervous,” Town- ley said.
In the Flathead, that will likely lead to fewer shopping sprees from Canadian buyers, she said, because they’ll only search out the essentials for their trip. Restaurants will probably retain busi- ness, she said, but retail will suffer, if it hasn’t already.
At Costco, where Canadian custom- ers make up 10 percent of the total sales, their absence has been noted. Warehouse manager Greg Gillingham said sales to Canadian customers are down about 30 percent since last December.
“It’s quite a bit of money,” Gillingham said. “It’s definitely affected us.”
Sales are still strong with locals and American tourists, he said, but it seems the Canadians are staying home and not crossing the border for high-ticket items. Townley said at this point, it’s not worth it for many Canadians to make the road trip to the Flathead just to buy goods.
“It certainly looks like there’s a little less wind in the sails of Canadian spend- ing and activity in the U.S., particularly from western Canada,” Barkey, of the
BBER, said.
Not only will it affect retail goods, Bar-
key said, but the construction and real estate industries might feel the sting of fewer Canadians buying or building sec- ond homes here.
Kalispell Chamber of Commerce pres- ident Joe Unterreiner said the recent waning of the Canadian dollar was part of many local businesses’ budget for 2015, since it wasn’t a surprise. And since cur- rency exchange rates are cyclical, Unter- reiner said the Flathead is a different val- ley than the last time the Loonie dipped.
“We’ve emerged as more of a regional trade center. We have a lot more retail offerings that make us more of a magnet,” Unterreiner said. “Plus, we’ve picked up more hotel space, (Whitefish Mountain Resort) has expanded, so there are some things in the cycle we’re in that will hope- fully help offset the traditional waxing and waning.”
Townley noted that industries cater- ing to Canadians in higher income brack- ets, such as medical tourism, won’t likely be affected as much, because those visi- tors have the cash to spend.
For the general tourist making less than $200,000 a year, though, the fall- ing dollar hits harder.
Several factors still undetermined,
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SEPTEMBER 2, 2015 // FLATHEADBEACON.COM