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Americans tourists eager to make the most of their travel dollars will boost spending in Canada to the highest level in over a decade in 2016, according to analysis released Monday by TD Economics.
TD is calling for the loonie to average roughly 71 cents U.S. this year, which it believes will help drive down cross-border trips by Canadians to the lowest level since the Great Recession. As a result, annual Canadian spending in the U.S. will dip to $20.5 billion, while American spending in Canada is seen hitting $9.6 billion.
“You’re really starting to see things accelerate, particularly when the loonie went on a substantial slide at the end of 2015,” said Derek Burleton, vice-president and deputy chief economist at TD Economics, in an interview with BNN.
The flow of travel across the Canada-U.S. border has tilted to the south since 2002. By 2013, the spending gap widened to as much as $13 billion due to growth in both long and short-term trips by Canadians to the States. However, the prolonged plunge in the value of the Canadian dollar has seen that trend lose momentum as visiting Canadians bemoan the 35-to-40 percent currency adjustment.
Burleton says while the currency impact is significant, it does not imply a fundamental change in cross-border spending activity. Snowbirds for example – who make up a major component of Canadian spending in the U.S. – have proven resilient to currency swings.
“The short-term stays are the most sensitive to the Canadian dollar, the shopping-type excursions,” said Burleton. “In terms of longer-term stays it’s been much less meaningful.”
TD says while the shifting tourism dynamics won’t be a massive game changer, the knock-on effect of the loonie hovering near a 13-year low will provide some underlying support for Canada’s troubled economy.
“We see little stopping a continuation of this trend in 2016, providing a modest but welcome tailwind to Canada’s economic growth,” said Burleton.