Big price gap still exists between Canadian, U.S. goods: study

Canadians are still paying much more than Americans for many of the same goods, even though the loonie has been near parity with the U.S. dollar for much of the past year, a new report says.

In a followup to a study done last year, BMO Capital Markets said the gap between what Canadians pay and what U.S. consumers pay on a collection of 17 items has narrowed only slightly — from 24 per cent to 18 per cent.

"The price gap remains extraordinarily large," said the study's author, BMO Capital Markets deputy chief economist Doug Porter.

Furthermore, Porter said the signs suggest the bulk of the price cutting may be over.

"In other words, without further pressure, this may be as good as it gets for Canadian shoppers," Porter said. 

Last year, when the Canadian dollar was ascending sharply towards its peak of $1.10 US, consumers here howling that prices of goods were not falling to reflect that growing purchasing power.

Porter said companies argued last year that they needed time to adjust prices to reflect parity between the two currencies. "Well, the loonie has averaged almost parity over the last year (98.8 cents US to be precise), so time's up," he said.  

Over the past year, prices on some goods — especially on high-profile items like books and automobiles — have indeed narrowed. But large gaps still remain.

The survey found that the average price of five mid-range cars was, on average, 19 per cent higher in Canada. Discounted books were still 21 per cent more expensive.  

A sample of eight point-and-shoot digital cameras found a 26 per cent price gap between the two countries ($374 in Canada versus $297 US south of the border.)

A Maytag washer and dryer was 21 per cent more expensive in Canada than in the U.S., while a Nintendo Wii was 12 per cent more expensive here.

The only good news in BMO's sample survey was in the cost of the Grand Theft Auto video game. It cost $59.99 in both countries.  

Porter said the price cuts that did take place after the Canadian dollar moved towards parity with the U.S. greenback have helped to keep Canada's inflation rate in check. The loonie's rise has also helped insulate the country from some global inflation pressures on food and energy, he notes.

But since the start of the year, the loonie has been hovering in a range between a low of 96.44 cents US and a high of $1.0298 US.

"With the currency stuck in the doldrums, and many predicting it could even retreat in the year ahead, it seems unlikely that there will be another big spontaneous push to drive Canadian prices considerably lower," Porter said.

"Firms are pricing to what the market will bear," he told CBC News. "The U.S. is the most competitive market in the world and of course the U.S. consumer is in recession, so we are seeing much more price restraint in the U.S. than in Canada."

Porter urges Canadians to comparison shop and when big discrepancies are found between Canadian and U.S prices, he suggests consumers ask the retailer to justify or explain them.