Day trips to U.S. at 6-year high as strong loonie inspires cross-border shopping

[Bulldog]

TORONTO - Day trips to the United States hit a six-year high in September, as Canadian shoppers took advantage of the loonie's equal footing with the American dollar to shop across the border.

"The lion's share of the story here is the loonie," said BMO senior economist Doug Porter. "The strongest gains we're seeing are in one-day car trips to the U.S., and that certainly suggests that cross-border shopping is picking up big time."

The loonie hit parity with the U.S. greenback on Sept. 20 and its average for the month hit 97.5 cents US, while the number of same-day, cross-border trips surpassed the two-million mark for the first time this year.
 

The Canadian currency closed up 0.45 cent at 101.97 cents US Tuesday, despite fresh inflation data that gave the central bank more leeway to ease interest rates.

Economists expect the travel numbers will climb even further in October and November - two months in which the dollar kept climbing and when the issue of price discrepancies for the same goods in each country hit fever-pitch.

Consumers have been complaining that retailers in Canada aren't lowering prices, leading them to pay much more for the same goods that can be purchased cheaper in the United States.

Several retailers have tried to entice them back by promoting price cuts at home, with Shoppers Drug Mart (TSX:SC) the latest to announce changes.

On Tuesday, Toronto company said it would sell greeting cards and books at 25 per cent off the listed Canadian price. It's also handing out in-store redeemable coupons for an extra 50 cents off on all cards costing $1.50 or more.

Sears Canada Inc. (TSX:SCC), Rexall Drug Stores and Ford Motor Co. have all cut prices in response to the stronger loonie, as have Canadian Tire, Hudson's Bay Co. and Wal-Mart.

Economists said those discounts aren't likely to reduce the number of cross-border shoppers yet, saying it's still too early to expect a reversal of the shopping exodus.

"I'd imagine you'll see still a lot of cross-border shopping into the Christmas season, because when you're doing a large shopping trip there probably still is quite a significant saving, especially when we look at the retail environment," said Adrienne Warren, a senior economist with Scotiabank.

"Given a more sluggish consumer sector in the U.S. right now, there's probably more aggressive discounting there than we see here, regardless of the currency."

The "hassle factor" of crossing the border may blunt some of the enthusiasm for cross-border shopping, Porter added, but it's unlikely to really slow the pace of travel "given where the currency is and the fact that most of the price cuts to date have been relatively moderate."

Statistics Canada said Tuesday that Canadians made about 2.1 million same-day car trips south of the border, a four per cent increase from August.

But the loonie hasn't simply increased the number of day trips to the U.S. - all forms of travel to the U.S. were up.

The agency said overnight car travel increased 4.2 per cent to 930,000 in September, the largest number recorded since December 1993. Canadians made 507,000 overnight trips to the United States by plane, up 1.5 per cent, and the first time that overnight plane travel to the United States topped the half-million mark.

In the opposite direction, overall travel from the United States to Canada remained relatively stable at 0.1 per cent in September.

Same-day car travel from the United States fell 2.3 per cent in September to 945,000, just above the record low of 914,000 set last February.

Americans made an estimated 1,142,000 overnight trips to Canada in September, up 2.4 per cent from August. Overnight car trips increased one per cent to 672,000, while those by plane edged up 0.4 per cent.

Statistics Canada said September's level for same-day car trips was still a long way off the peak of 5.4 million recorded in November 1991, when the value of the dollar was just 88.5 cents US.

That jump was also related to currency increases, as well as the introduction of the GST - which went into effect that year.

"Back in the early 1990s, a lot of the big U.S. retailers had not planted roots in Canada so there was also quite a bit of talk about a difference in choice in going shopping in the U.S.," Porter said.

"That's more less of a factor now, and perhaps one reason why we may not return to those prior peaks."

http://travel.canoe.ca/Travel/News/2007/09/20/4511698-cp.html