When the Canadian dollar began its speedy ascent three years ago, anxiety levels quickly rose along with it. As the dollar crossed the US80-cent mark in 2004, it was widely anticipated that the manufacturing sector—which watched the strong dollar take a major bite out of its export sales—would be in crisis and the economy all but sunk.
This week, as the dollar reached a 30-year high, just above US92 cents, many of those fears remain. But the Canadian economy has also shown an amazing resilience, proving more than capable of ticking along despite the strong dollar and weakened manufacturing sector, particularly in Ontario.
High global commodity prices and high energy prices have helped boost the domestic economy (including the construction and retail sectors), offsetting many of those early fears, say economists. But even many manu-
facturers have shown themselves capable of operating in a US90-cent world, avoiding the massive job cuts and bankruptcies many had feared. “They have been adapting and moving forward,” says Dawn Desjardins, senior economist with RBC Financial.
Manufacturers are still under big pressure. They’ve been hit by “the perfect storm” of high input costs for raw materials and energy, and a high dollar, says Jayson Myers, chief economist with the Canadian Manufacturers and Exporters. Firms that have fared best are those that have become much more efficient, says Myers. “In the long term, the only way Canadian manufacturers can continue to compete is to become much more specialized, and much more innovative,” he adds.
Canadian companies should also get used to this kind of environment—economists say the high dollar is here to stay for a few years to come at least. It might not be welcome news for manufacturers, but at least this time around, nobody thinks the sky is falling. M
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