MONTREAL (AFP) — Canadians cheered Friday for their beloved loonie, reaching parity this week with the US greenback for the first time in 31 years, but consumers are not yet benefiting, and manufacturers are reeling.
The loonie, a sobriquet given to the Canadian dollar, worth a mere 62 US cents five years ago, reached parity with the US greenback in morning trading Thursday, amid soaring commodity prices and fears of a slumping US economy.
It is the first time since November 1976 that it has soared so high, and was holding steady Friday in global currency markets.
Economist Maurice Marchon of HEC Montreal business school told AFP this lightning-fast appreciation of the Canadian dollar is "globally positive."
But, Canadians are continuing to pay more for American products, as much as 24 percent more for the same cars, the same magazines and the same greeting cards, according to a study by the Bank of Montreal.
The bank adds that Canadian retailers must eventually lower their prices, or risk losing business to cross-border shopping in the United States.
Canadian manufacturers, who rely on US sales, however, are "the big losers," Marchon said. "Their products are suddenly less competitive in the United States."
Some 80 percent of Canadian exports head south to the United States, and 66 percent of its imported goods originate in the United States.
Finance Minister Jim Flaherty acknowledged Thursday that the soaring Canadian dollar has "put some pressure on manufacturers, particularly the suddenness of the depreciation of the US dollar."
But a high loonie also "helps Canadian manufacturers acquire new technology," he added.
Perrin Beatty, president of the Canadian Chamber of Commerce, commented: "For every penny that the loonie goes up, we're looking about a billion and a half dollars more in the manufacturing sector that is lost."
He underscored that Canadian firms had already purchased a lot of US equipment, machinery and tools in recent years to boost their productivity and remain competitive.
But, he added, they must continue to increase their productivity because "increases in the loonie have stolen away the gains that they have made" thus far.
Since January 2003, the situation has cost 268,000 high-paying jobs in Canada's manufacturing sector, primarily in eastern Ontario and Quebec provinces, a fallout denounced by union bosses as a "catastrophic."
However, a net 1.3 million jobs have also been created, mostly in the service industry and western Alberta province's booming oil sands industry, during the same period.
As well, unemployment has remained at about six percent -- its lowest level in 33 years.
"A computer programmer earns as much as an auto worker at GM," commented Marchon.
The Canadian tourism industry also fears the worst, with fewer Americans expected to visit Canada's hinterland, and more Canadians opting for US trips over vacations in their own vast backyard.
Indeed, the number of Americans traveling north fell 5.2 percent in July, year-over-year, to its second lowest level in 35 years, Statistics Canada reported Thursday.
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