Monday, October 27, 2008

How can a 4-yr low of the $C not bolster Canadian exports?

From Bloomberg:
”Former Canadian Finance Minister John Manley said exporters may not benefit from a weaker currency because of a lack of consumer confidence in the U.S., Canada's main market.

``The lower dollar helps, but if the U.S. consumer is staying home, it doesn't really matter,'' Manley told reporters after a speech today in Ottawa. ``If they aren't buying anything it doesn't really matter what our exchange rate is.''

The Canadian currency is headed for its worst monthly drop since at least 1950, depreciating 17 percent since Sept. 30, as prices of exported commodities have declined. The Bank of Canada on Oct. 23 forecast ``sluggish'
' economic growth over the next few quarters because of the U.S. recession and the global credit crisis.”
RW: It seems like a bit of a stretch to say that lack of consumer confidence will offset this:

Canada’s exports will surely boom if the $USD maintained these levels. It’s not like we are buying mostly jewels from Canada – we are buying energy, car parts, tourism (skiing), or timber. Those goods are bound to sell well in spite of low consumer confidence, which consequently, was already low before the exchange rate surged.

Rebecca Wilder

2 comments:

  1. Hey Rebecca,

    Perhaps I'm confused by The Finance Minister's logic, but isn't it true when a exporting country's currency has fallen (like Canada's), their exports become more attractive to importers, because the importer can get a better value or return for their purchase?

    For example, a couple months ago a bright spot in the dismal US economy was our high volume of exports. Wasn't it something like for the first time our total exports actually came close to rivaling our total imports? The dollar was so weak at the time, foreign economies were importing extra from the US because the weak dollar allowed them to get much more "bang for their buck".

    -Tim

    ReplyDelete
  2. Hi Tim,

    My thoughts exactly.

    Thanks for reading and for the anecdotal evidence!

    Rebecca

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