My Salt n' Vinegar chips store on eBay will be opening soon.

Not too long ago, I wrote a post about the differences in the cost of living in various cities. Those outside the Canadian borders (excluding Insatiablelf and gillian, two of my favourite expats) may have noticed that the Canadian currency has been appreciating against the greenback for some time now. In the Canadian economy, that means that our largest trading partner is somehow slightly less interested in buying our goods, and the goods we get from down south (not that far south) are slightly more expensive, globally speaking.

It's a little outdated at this point, but I'd been planning to make mention of this study from BMO Nesbitt Burns (I just love chief economists for some reason, but don't tell them that -- they'd get all blushy and probably hide behind their blackberries). Canadians will always tell you that they're paying too much for US manufactured goods, or for goods that are far lower priced south of the border (cross border shopping, anyone?). Just ask anyone who shops on eBay and gets a deal paying suggested retail in US dollars, but paying in Canadian currency.

In economic terms, the concept of what you can get for your dollar in various countries is called purchasing power parity (PPP), and once upon a time, it was illustrated with something called the Big Mac Standard. Basically, it's th relative cost of buying a McDonald's Big Mac on both sides of the border.* Or, a good should be about the same price, after currency conversion, in two countries. On most goods, this holds true.

But have a look at the BMO table, calculating with the exchange rate, the relative prices on various goods:

The study, brief as it is, makes reference to the price of books, something that is clearly obvious to most Canadians when they pay close to 20% more than Americans for. The Big Mac price difference, by the way, is within 1%. The new Harry Potter** book? 13% more expensive in real terms in Canada than in the USA. The Honda accord is about the same, while iPods and CDs are only slightly more expensive North of the 49th. What we really learn is that the value of the currency is only part of the picture, and only sometimes is it really worthwhile to buy in Canada vs in the US (as long as it's not costing you a fortune to get there to make the purchase, and you're not going to get tagged with duty on the way back).

So to those bloggers I mentioned at the top, next time you swing back into the land of maple syrup, good cheddar, Coffee Crisp and Smarties, email me first and I'm sure we can make some sort of mutually beneficial arrangement. You dig?

*this only holds true for tradeable goods. Haircuts and repair service on your car don't count, as you can't readily decide to go across the border to have that done because it's cheaper on the other side. Okay, you could, but you'd be crazy to do it.

** I figure I'm about the last blogger to actually mention this book, so there. I said it. Are you happy now?

Posted bythemikestand at 9:09 PM  

4 stepped up to the mike:

SRH said... 9:30 AM, July 26, 2007  

I suggest you come to the US and purchase Ethan Allen Rugs by the dozens. Resel them in Canadaland and make a killing. I am sure there is quite a market for them, otherwise the study would not have looked into their price structure

Steph said... 9:39 AM, July 26, 2007  

I'm heading to Calais while I'm home: do you need anything while I'm over there?

'cause Hardwicke's Convenience store always has great prices on their pork rinds. (gag, gag)

Lesley said... 1:00 PM, July 26, 2007  

I think the reason books are so much more expensive here is because there is a special book tax worked into the price. I am almost positive that's what I've heard.

Karen said... 8:59 PM, July 26, 2007  

"Canada: Dedicated to reading!"

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