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article imageRetailers Need to Bring Down Prices Says Finance Minister

By Nathalie Caron     Oct 22, 2007 in Business
As Canada’s Finance minister is asking retailers to re-evaluate their prices to reflect the strong Canadian dollar, the currency plunged a couple of cents after Bank of Canada governor David Dodge claimed there was no good reason for the sudden hike.
The strong Canadian dollar has Finance Minister Jim Flaherty asking retailers to drop their prices as soon as possible. This will help put a damper on cross-border shopping, as a growing number of Canadians go shopping south to take advantage of their new buying power.
"My job really for the government is to say to the retailers that you should move your inventory prices as quickly as you can to reflect the reality that the Canadian dollar is much stronger than it was even a few months ago," Flaherty told CTV's Question Period Sunday, quotes a CanWest report.
"Their prices as soon as possible should reflect the increased purchasing power of the Canadian dollar is a vis-a-vis the U.S. dollar."
A few Canadian retailers have already taken notice and started reducing prices to lure shoppers back into their stores. Zellers has announced last Friday it would chop prices on over 250 household products. Wal-Mart Canada has announced it would sell some video games at the same price as those sold in the in the U.S.
CanWest states that Flaherty will be meeting tomorrow with the Retail Council of Canada, the Hudson's Bay Company and other industry representatives to discuss the challenges of the high dollar and how to deal with it.
While the demands on them by the public and now by the Finance minister are real, retailers feel too much is being asked of them, arguing they are victim of the high prices of suppliers.
If they lower their prices to consumers to better reflect the strong dollar, they'll lose money. But if they keep prices the same, they will lose customers to the US, believes Diane Brisebois, president of the Retail Council of Canada.
Please don’t rain on our parade, Dodge!
But the strength of the Canadian dollar may be short lived. It has already faced a drop following a statement made by the governor of the Bank of Canada, David Dodge.
He said in an address to Institute of International Finance in Washington, this weekend:
“I have noted the complexity and opacity of some of the structured products at the heart of the recent turbulence. Because of this complexity and opacity, it is extremely difficult for investors to determine, with confidence, both the creditworthiness of the assets backing a particular security and the market value of the security itself.”
While the unpredictable nature of the economy is somewhat a given notion, the statement seemed to resonate on the Canadian dollar. It dropped 1.42 cents to 102.12 cents US - after plunging as much as 1.73 US cents, partly attributed to Dodge’s comment.
The entire stock market faced a down slope last week. The TSX Venture Exchange in Toronto was down 58.1 points to 2,951.92. On Wall Street, the Dow Jones industrials fell 81.29 points to 13,440.73. Overseas, London's FTSE 100 index retreated 80.2 points to 6,447.7 and the Paris CAC 40 slid 92.65 points to 5,647.83.
Frankfurt's DAX 30 declined 101.44 points to 7,782.68 after Commerzbank AG warned that its exposure to subprime mortgages in the United States would be bigger than initially thought, states the CP report.
The drop followed earnings reports from the U.S. banking sector and industrial giant Caterpillar which renewed worries about deteriorating credit conditions and damage from the housing sector spreading to the rest of the American economy.
"I think that investors recognize that the world is a somewhat more uncertain place than was the case three months ago," said David Wolf, head of Canadian economics and strategy at Merrill Lynch Canada, quotes the Canadian Press.
More about Canadian dollar, Retailers, Flaherty
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