Fewer Canadians crossing into N.D. as exchange rate dips
Auto crossings at a nearby Canadian border crossing were down slightly in the first few months of this year, a phenomenon that some Grand Forks area business leaders blame on the weakened Canadian dollar.
The number of personal vehicles, as opposed to trucks and buses, coming into the U.S. at Pembina, N.D., between January and March this year totaled 63,582, down from the 71,363 during that same period last year, according to the latest figures available from the U.S. Customs and Border Protection. March alone saw more than a 20 percent drop in auto traffic compared to March 2013.
Meanwhile, the Canadian dollar has slightly weakened against its U.S. counterpart for the past year, falling from being at par with the U.S. dollar on May 8 of last year to about 89 cents to the U.S. dollar in March and then 92 cents on Tuesday.
Many Grand Forks businesses depend on Canadian shoppers for a significant chunk of their income, and many keep an eye on the exchange rate for any potential effects on the local economy.
“I have noticed a little bit of a drop-off (in Canadian traffic), but not a whole lot,” said Travis Hoffner, a manager at Menards in Grand Forks. When asked why traffic has slowed down, he simply said: “the exchange rate.”
Still, a Canadian economist said the exchange rate is historically strong, and local business owners said they’re still seeing plenty of Canadian customers. City sales tax collections this year also indicate the local economy hasn’t seen a significant downturn as a result of fewer Canadian visitors.
Barry Wilfahrt, president and CEO of the Chamber of Grand Forks and East Grand Forks, cautioned against using month-to-month comparisons for Canadian traffic.
“What you want to look at is, ‘Okay, what’s the long-term trend?’” he said.
In 2013, 379,271 personal vehicles crossed the border at Pembina, 879 fewer than the previous year, according to the Bureau of Transportation Statistics at the U.S. Department of Transportation. That’s less than a quarter of a percent decrease, and is much better than the recent low of 265,210 crossings in 2009.
Pembina is easily the state’s busiest crossing for personal vehicles, accounting for 45 percent of traffic at North Dakota’s 18 ports of entry in 2013, according to the BTS.
Craig Alexander hears more about the exchange rate from individual Canadians than he does from business leaders. That includes his mother, who snowbirds in Florida.
But the chief economist at TD Bank Group, based in Toronto, emphasized that even at 92 cents, the Canadian dollar is relatively strong.
“In the early 2000s, the Canadian dollar was down around 62 or 63 (U.S.) cents,” he said. “For a very long period of time, Canadians thought an exchange rate around 80 cents was actually quite respectable. So 92 cents is still very strong.”
Alexander cited a number of factors that allowed the Canadian dollar to be at par with and at times exceed the U.S. dollar in recent years, including a stronger economic recovery there, commodity prices, and interest rates. But in recent months, “the glow around the Canadian dollar started to diminish,” he said.
“I think what happened deep down is that the Canadian dollar overshot its fundamentals,” Alexander said. “I think the Canadian dollar should have not have gotten to par. I think it was the product of a combination of factors that made the Canadian dollar look particularly attractive at a point in time, and it wasn’t a sustainable exchange rate.”
Alexander said the Canadian dollar could dip to about 88 cents to the U.S. dollar this summer, but bounce back to what it is now for the long term.
“I know that’s something that local businesses aren’t necessarily going to want to hear if they’re concerned about cross-border shopping,” he said. “But once again I would stress that this is still a very strong exchange rate.”
Grand Forks businesses, however, haven’t noticed much of a decline in Canadian shoppers. That includes Target on 32nd Avenue South, where workers keep track of Canadian holidays to make sure they stock up ahead of time.
“We haven’t felt the impact here,” said Amber Chaika, an assistant manager at Target. “We’re still seeing a lot of Canadian traffic.”
The same goes for nearby Qdoba Mexican Grill.
“We are always busy with Canadian traffic,” said the restaurant’s general manager Rancee Rupert, who said “pretty close” to half of their customers are Canadians.
Local business owners often cite lower prices as one reason Canadians make the trek to Grand Forks for shopping. But as the exchange rate dips, travelers get less and less for their dollar.
“My experience has been over the many years that I’ve been doing this is that for every nickel, you get some people dropping off,” said Hal Gershman, owner of Happy Harry’s Bottle Shops and Grand Forks City Council president. “When it goes to 95 cents on the dollar, you see a certain little percentage drop off. When it goes to 10 cents, you see a little bit more.”
Still, Gershman said, Canadian traffic is strong. He tracks that using metrics like border crossings and hotel occupancy, as well as more anecdotal factors like looking at license plates in the parking lot and what products are selling.
And Gershman pointed out that sales tax collections are still doing well. City sales tax collections in Grand Forks were higher in three out of the five months this year compared to the same months last year, according to the North Dakota State Treasurer’s office.
“It tells me that those who are coming are shopping,” Gershman said.