Yes indeed the purchasing power of the Canadian dollar is down relative to the USD. There are some reasons for it.
#1) Demand is still there to sell goods at the same prices in Canadian dollars as before. Many cross-border companies are using Canada as a profit centre to make up for losses south of the border. Example being GM, demand for GM cars in Canada has skyrocketed but at a higher price as expressed in USD, yet GM is still struggling as a whole.
#2) There isn't the same type of competition for goods and services in Canada as in the US which would prompt more price wars. Example here would be Cell phone service. Minimal competition, poor service and high prices. Telus, Bell, and Rogers make their money off of their wireless businesses primerily. Go to the US, in just about every consumer good or service, there is a vast amount of competition for your business. It's a more mature marketplace. .
#3) The exchange rate has been quite volitile the past 5 years with the exchange rate going from 0.62 to 0.95 in that span. Businesses don't want to lower their prices now only to have to raise them a year or two down the road and experience the consumer wrath then. Especially if we're still willing to pay today's prices.
#4) Our infrastruture system, ie freeways/railways isn't as developed as the US. It simply costs more to make and transport goods in Canada. Even if we were at par it would still cost more here for that reason alone.
|