BUSINESS

Falling Loonie Sinks Canadians' Travel Plans: Study

03/03/2014 10:35 EST | Updated 03/03/2014 10:59 EST
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More than 40 per cent of Canadians say they are less likely to travel this spring thanks to the falling loonie, a new study from BMO Insurance says.

British Columbians were the most likely to say they are reconsidering taking a vacation abroad this spring, with 49 per cent of respondents saying they are taking a second look at their plans.

Quebecers were the least likely to change their plans, the study found, with only 35 per cent saying they were reconsidering plans. Overall, 42 per cent of respondents said they are less likely to travel this spring.

Nearly two-thirds -- 61 per cent -- said they plan to travel inside Canada.

The loonie has fallen some 10 per cent against the U.S. dollar over the past year, with about half that slump taking place since the start of the year. But the Canadian dollar has stabilized in the past few weeks. It was trading at 90.13 cents U.S. Monday morning.

Nonetheless, analysts around the world expect the currency to fall further, with Goldman Sachs predicting an 88-cent loonie this year, while some analysts expect it to fall even farther than that.

Canadians can expect to see consumer prices rise as a result of the lower loonie, as importers face higher prices for goods made abroad. That may actually be music to the ears of the Bank of Canada, which has been worrying about disinflation in Canada’s economy. The latest inflation report shows price rises moving back towards the range targeted by the Bank.

The loonie’s slide will likely translate into good news for companies’ bottom lines, especially those who export (because the prices they charge will be lower on the global market), and those, like the big banks, who have foreign operations. Their foreign earnings will translate into bigger money when counted in Canadian dollars.

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