OTTAWA -- The price gap between what Canadians pay for a consumer item at home compared to what is paid across the border appears to be narrowing, but that doesn't mean Canadians are now paying less, a new report suggests.
The Bank of Montreal's latest price comparison of selected consumer items does show the differential has closed to about 10 per cent from 14 per cent in May 2012.
But chief economist Doug Porter notes that is almost entirely due the lower value of the loonie, which in recent weeks has dropped below parity and now hovers just over 96 cents U.S.
In terms of actual prices, they have largely remained constant as the loonie lost about four cents in comparison with the U.S. greenback, meaning the devalued Canadian dollar was able to increase its relative purchasing power.
"One of those lingering fundamentals is that the Canada-U.S. price gap remains locked in place, still drawing a phalanx of cross-border shoppers southbound from Canada," Porter said in the report, which compared prices in 10 broad consumer categories ranging from baby items to automobiles to electronics. The comparison was done in the past week.
The survey found the biggest gap 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 from 10 in the last survey.
The price gap became a political as well as an economic issue about six years ago after consumers began to complain that while Canada's currency had at last achieved parity with the U.S., even briefly rising to US$1.10, no such equality was evident in consumer prices.
Finance Minister Jim Flaherty asked the Senate to study the phenomenon, resulting in a report earlier this year that recommended Ottawa try lowering or eliminating tariffs on some consumer goods.
The March budget did cut tariffs on some sporting goods and baby clothes, but Porter said his sampling was too limited to show whether that had an effect.
-- The Canadian Press