Open side-bar Menu
 The AEC Lens
Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for … More »

Canada’s Currency Drop Encourages Cocooning

 
February 16th, 2016 by Alex Carrick, Chief Economist at ConstructConnect

Article source: CMDGroup

My favorite meal when traveling on business or pleasure used to be breakfast in the hotel where I was staying. In the ‘old days’, a morning repast was almost invariably cheap, plentiful and delicious.

Last summer, I took my family to Chicago for some wonderful sightseeing. We live in Toronto. (Our oldest child has moved out of the house and he and his girlfriend undertake their own travel adventures.)

The price of the breakfast buffet where we were registered downtown was $32.50 USD. For the four of us, that would have come to $130.00 USD.

Such a charge would have been steep enough on its own. Factor in the value of the Canadian dollar at the time, and the price was going to be $160.00 CAD.

Consider the further devaluation in the loonie since then, and the pain rises to $185.00 CAD.

That’s serious coinage. It’s nearly enough to rent a tuxedo, which I’ve always considered to be an excursion into luxury land.

Needless to say, if you know my penny-pinching ways, we found a more modest place to eat, a short walk away.

The point I’m making isn’t simply that life has become pricey. If you’re Canadian, and you don’t want to just stay at home, there’s a whole extra dimension of cost that’s been added on account of your currency’s decline.

The drop in value of the loonie versus the greenback is being chalked up to the steep plummet in the global price of oil. That’s only a partial explanation. The more complete answer lies in the deterioration of Canada’s foreign trade balance from a strong surplus position before the Great Recession to mostly monthly deficits since then.

In a comparison of the U.S. and Canadian economies, the former – at least in the minds of international currency traders − stands out as the better prospect.

The U.S. economy is much bigger, more diverse and has a lead in one outstanding growth area, high-tech, that places it ahead of all other countries.

America is also fundamentally more inclined to encourage business investment.

Canada has a natural advantage − its resource riches. Unfortunately, the world commodities cycle, for now, has turned decidedly negative.

Despite the trying circumstances, there remain firms in Canada that want to undertake major capital projects. Pipelines to move crude to coastal ports immediately come to mind.

The level of opposition they are facing is out of all proportion to the harm they are ever likely to cause. Pipelines as an engineering feat have historically proven far safer at moving their cargo than rail traffic.

The Trudeau government’s latest measures to add another layer of oversight and further stretch out the approvals process pile on the difficulties.

Canada’s contribution to global warming isn’t just minor relative to China, India and other far more populous nations. Rather, given the land mass that Canada claims on earth overall, it is borderline negligible.

Canada’s foreign trade accounts for 25%-to-30% of gross domestic product (GDP), compared with approximately 15% in the U.S.

The cheap Canadian dollar, through promoting exports and inhibiting imports, may eventually achieve some of the sectoral shifts that will provide better balance for the economy.

That’s a fond wish. In the meantime, my advice for all my fellow citizens is to embrace your inner cocoon tendencies or be prepared to pay dearly if you venture outside your nest.

Related posts:

Tags: , , , , , , , , ,

Category: CMD Group

Leave a Reply

GRAPHISOFT: ARCHICAD download 30-day FREE trial
Graphisoft ARCHICAD  Download a 30-Day FREE trial
TurboCAD pro : Start at $299
CADalog.com - Countless CAD add-ons, plug-ins and more.



Internet Business Systems © 2016 Internet Business Systems, Inc.
595 Millich Dr., Suite 216, Campbell, CA 95008
+1 (408)-337-6870 — Contact Us, or visit our other sites:
TechJobsCafe - Technical Jobs and Resumes EDACafe - Electronic Design Automation GISCafe - Geographical Information Services  MCADCafe - Mechanical Design and Engineering ShareCG - Share Computer Graphic (CG) Animation, 3D Art and 3D Models
  Privacy Policy