Tuesday, February 22, 2005

SPOTLIGHT:  International travel

Loonie soars, but not cross-border shopping

FOR THE first time in 20 years, the number of Canadians traveling south of the border has not responded to a rise in the value of the Canadian dollar, according to a new study.

Since 2002, the close relationship between the dollar and the amount of travel by Canadians to the United States has broken down. In 2004, even when Canada’s dollar was hovering around the 84 cents US mark, Canadians showed no greater inclination to head south of the border.

Canada has been much like the rest of the world in shunning the United States as a destination, despite the surge in several other major currencies against the US dollar.

As a result, US destinations now account for about 74% of Canadian travel, down from 87% in 1991. Canadian travel overseas, on the other hand, doubled over the same period to 5.7 million trips worldwide, not even slowing down during 2003 when worldwide travel slumped.

Traditional ties

In the early 1990s, the number of cross-border shopping trips by Canadians to the United States increased substantially at the same time as the loonie rose in value against the US greenback. That surge in same-day auto trips south of the border aggravated weakness in consumer spending in Canada, which was slumping due a recession.

It also considerably worsened Canada’s international travel deficit. These trends ended once the dollar began falling again in 1992.

The recent increase in Canada’s exchange rate has been even stronger than during the period between 1986 and 1991. However, the only observable impact has been to discourage Americans from traveling to Canada, although some of the decline is also part of the negative fallout from the September 11 attacks.

You can read the full report "The soaring loonie and international travel" free on our website.

For more information, contact Francine Roy (613-951-3627), Current Economic Analysis Division.

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