Business Report: The Low Canadian Dollar and the Quilting Industry

Business Report: The Low Canadian Dollar and the Quilting Industry

 

Note from International Textiles: 
Many of you have contacted us in the past several weeks inquiring about our price revisions. 
In response to your questions, we are glad to provide you with some insight into the current 
Canadian economy and how it impacts our business. We hope this article will help 
answer many of your questions, but should you still have questions regarding 
our pricing policies, please contact your rep or give us a call.

These days you can’t turn on the news without hearing about the dwindling of the Canadian dollar and watching economic experts debating whether or not Canada is in a recession. While it’s not my intention – or within my field of expertise – to analyze the current conditions and offer a stance on the subject, I’d like to review with you how the low Canadian loonie affects our industry. At the time of publishing this article, the Canadian dollar reached 0.7649 USD, and according to most experts is well on it’s way to passing the 0.75 USD threshold shortly (while some even predict it will sink as low as 0.70 USD this year!).

But how did this happen? Why is the loonie so devalued at the moment? Explanations range from the low price of oil, the economic uncertainty created by the upcoming federal election and the thriving US economy. “It’s a perfect storm of events that’s sinking the Canadian dollar,” Adam Button, a currency analyst with ForexLive.com, told CBC News in an interview. He cited the collapse in oil prices that began last summer and the soaring value of the U.S. dollar. (Source)

loonie-chart-2015

The lower value of the Canadian currency also impacts inflation – not only are imported good more expensive, but also the value of goods is starting to rise. This combinaison of economic factors explain why prices of goods, generally, have been on a rise these past few months.

The low Canadian dollar means that distributors, like us, have less purchase power in the world and have to pay more to get the goods from other countries. To learn more about rates of currency and it’s effect on importing/exporting, please watch this short educational video (the video uses the US as an example, but everything is applicable to Canadian currency as well).

 

Barnacle Bay

But how does this economic situation impact the quilting industry specifically? As many of you know already, our industry is mostly based on imported goods since most fabrics are printed in Asian countries like China and Korea. This means that the cost to import these goods into Canada has risen with the lowering of the currency value. Fabric, and other products considered in economic terms as being ‘non-durable’ goods, are the hardest hit by this devaluation of our currency. That’s because they “are imported in high volumes and are more subject to currency fluctuations than durable goods, experts say.” In contrast, “durable goods, like cars, have negotiated prices and contracts months in advance at previously agreed upon prices. Those aren’t likely to be renegotiated.” (Source) Simply put, because we place orders on a weekly basis, every order we place for foreign goods is impacted by the currency value at that time.

“The low Canadian dollar will raise prices of domestic goods in Canada if the importers, such as retailers right across the board, are paying more, and in turn the consumer will have to make up for those costs,” said Monica Dale, Sault Ste. Marie Chamber of Commerce president. (Source) While some industries like tourism and manufacturing might feel some temporary positive effects, the retail industry is the most severally affected by this economic situation. On a more positive note however, we might see more and more consumers turning to brick and mortar stores instead of purchasing in American currency online.

It’s a matter of educating your clients that, regardless of the currency rate, shopping locally is beneficial to the Canadian economy as a whole. Watch the short CBC report below, and let us know how the currency changes have affected your business in the comments below!

Jessica