10/09/2013 04:25 EDT | Updated 10/14/2013 12:26 EDT

Canada-US Price Gap Down, But Shoppers Still Heading South: BMO Report

a shopping cart is a transition ...

OTTAWA — A new report suggests the price gap on consumer goods between Canada and the U.S. has narrowed, but most of that has to do with the lower value of the loonie.

The analysis by Bank of Montreal chief economist Doug Porter shows the price-gap on an admittedly small and random sample of goods has narrowed to 10 per cent, from 14 per cent when last conducted in May 2012.

But Porter says most, although not all, of that can be accounted to for in the recent decline in the Canadian dollar.

In recent weeks, the loonie has been hovering around 96 cents U.S. and Porter predicts it will likely settle at about 95 cents in 2014.

Porter says the entry of discount retailer Target to Canada and the government's recent removal of tariffs on sporting goods have had limited impact on prices.

The survey found the biggest gap is on baby items, such as diapers, which averaged 34 per cent more in Canada than the U.S. Running shoes were 19 per cent more expensive, but the gap in car prices had fallen to six per cent.

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