Last year, Canadians spent $22.3 billion in the U.S., a figure that has doubled over the past decade. But with the loonie losing almost 10 per cent of its value over the past few months, Canadians have less of a reason to flock south to spend money that buys less and less.
Toronto-Dominion bank says it expects Canadians will take three million fewer trips to the U.S. this year and next. That's going to bring total spending down by as much as $4.5 billion, the bank estimates.
About 80 per cent of the trips that Canadians take to the U.S. are same-day trips where they don't stay overnight. And that's the type that will be most likely to dry up, the bank says.
Most people who cross the border for less than a day are likely doing so for retailing reasons. There's a common perception among Canadians that prices are significantly lower in the U.S. for the same products, and the loonie's march toward parity and beyond from 2008 onward brought that discrepancy into stark relief.
Although it's being hidden by the gap between the two countries' currencies, estimates are that prices in Canada are still about nine per cent higher, on average, than they are in the U.S.
The lower loonie is likely to only exacerbate that, as Canadian retailers have less of a motivation to lower their prices, and in fact have a reason to hike them as their U.S. dollar-denominated input costs go up, so they may pass those increases on to consumers.
On the retail side, the lone bright spot for the lower loonie is that Canadians will probably spend the same amount in stores, TD Bank says — they're just more likely to do so in Canada. The bank singled out five Canadian municipalities that stand to see a retailing boom, and all are near the U.S. border: St. Catharines, Ont., Hamilton, Windsor, Ont., Sherbrooke, Que., and Abbotsford, B.C.
While it's likely that Canadians won't be taking day trips to buy bargains as much, anyone who goes south to soak up warmer weather is likely to keep doing so, the bank says.
It's estimated that as many as 500,000 Canadians travel to the U.S for as long as three to six months every year. Known as "snowbirds," they often own property in sun states so their travel plans aren't as vulnerable to the value of the dollar.
Florida is far and away the No. 1 destination for those folks. In 2012, Canadians spent $4.4 billion in Florida alone. That's almost three times as much as they spent in New York, despite that state being the most popular state to visit overall.
But Canadians spend more in Florida because they go for longer — an average of 21 days per trip in Florida, versus 2.5 days in New York.
"Make no mistake, the depreciation of the Canadian dollar will have an impact on Canadian stays in snowbird destinations such as Florida, but less than one might expect," the bank says.
Canadians already own so much real estate in those places that their expenses are relatively fixed once they're there. So a weaker loonie is not as big of a disincentive to go, TD says. Indeed, people who own U.S. real estate and rent it out when they're not using it are seeing an uptick in rents, because of the weaker dollar.
Add it all up, and the bank thinks the weaker loonie is enough to dissuade short trips, but not enough to seriously impact longer ones.
"Snowbird decisions are driven more by lifestyle choices than economic ones," the bank says.