Fluctuating loonie has little impact on business, finds poll
Canadian dollar is expected to drop to 89 cents US by the end of 2014
TORONTO—The fluctuating loonie may actually have little impact on most Canadian businesses, suggests a new survey by the Bank of Montreal.
About half (54 per cent) of business owners recently polled said changes in the dollar have no impact on them. While slightly more (55 per cent) of those who head small businesses—described as firms with less than 50 employees—said that held true for them as well.
This contrasts with 27 per cent who said their businesses benefit from a weak dollar and 18 per cent who believed they were worse off when the loonie falters against the U.S. dollar.
Those polled, on average, expect the Canadian dollar to drop to 89 cents US by the end of this year.
The Canadian dollar has been hovering around the 90-cents US mark in the last few weeks after falling as low as 89 cents in March. However, that is still below the currency’s 2014 high of 93.99 cents US on Jan. 3. The last time it reached parity with the U.S. dollar was in February 2013.
BMO chief economist Doug Porter says the valuation is on par with forecasts from the bank, which anticipates the loonie will drop to 87 cents US by the end of this year and stay within the 85- to 86-cents range in 2015.
Determining who wins and who losses when the dollar falls “very much depends on the business and sector they’re in,” Porter said.
“Certain industries tend to benefit from a weaker currency _ it could be a mixed blessing for some and for others it could be a curse.”
Generally speaking, he said producers tend to benefit and consumers tend to lose in that environment. Broadcasters, sports teams, utility companies and retailers tend to be potential losers from a lower loonie, while manufacturers, tourism and resource companies tend to win.
The survey found that those in Atlantic Canada (62 per cent) and Alberta (55 per cent) were the most likely to say a fluctuating dollar does not impact their business, while those in Saskatchewan and Manitoba (32 per cent) and British Columbia (31 per cent) reported that their companies would fare better amid a weaker dollar.
It also found that sentiment varied across sectors. Business and financial companies (76 per cent) were the most likely to say they wouldn’t be affected by a weak Canadian dollar, followed by 61 per cent of energy companies and 57 per cent of service sector companies.
Dan Kelly, head of the Canadian Federation for Independent Business, says many companies are used to dealing with currency swings, with many already factoring that into their business plans.
“When there is a sudden swing, that’s when it can really change the balance,” he said.
“Over the last five to eight years, there have been considerable swings in the Canadian dollar and small business owners have been finding ways to manage that risk better, either with hedging or other strategies, prepaying for other products and services and figuring out ways to address some of those challenges.”