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Maison Apothecare’s founder Natacha Rey formulates the company’s personal-care products.

Courtesy Maison Apothecare

Though the loonie had a good summer, bank observers expect it to sink again, which has its pros and cons for Canadian businesses.

For Melissa Rey, the lower Canadian dollar means higher costs, but at the same time there's a certain beauty in a lower loonie.

"The lower dollar has increased the cost of our raw materials, which we import from the United States and other countries," says Ms. Rey, vice-president of sales operations for Maison Apothecare, a bath and essential-oil manufacturing and sales business.

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"Because of this we have had to increase our prices. Our raw material costs have gone up approximately 20 per cent," says Ms. Rey, whose company has shops in Toronto and Niagara-on-the-Lake, Ont., as well as an online sales business.

Maison Apothecare develops and manufactures its own products using plant-based raw materials, many of which are imported. The products are formulated by Ms. Rey's sister, the company's founder, Natacha Rey. "The rising costs have resulted in a minimum 10-per-cent increase in our prices," Melissa Rey says.

"On the positive side, there's great value in the lower dollar, too. The price increase has not impacted our tourism business at all in Niagara-on-the-Lake. Our sales have gone up substantially."

The lower loonie is turning out to be a double-edged sword for large swathes of the Canadian economy. While the decline from rough parity with U.S. currency began at the end of 2012, the dollar was stricken by the plunge in energy prices toward the end of 2014.

Since its steep drop to below 70 cents, the depressed dollar has recovered but is expected to remain relatively low compared with U.S. currency for the foreseeable future.

The dollar is worth around 77 cents now but may sink a few cents again, according to currency forecasters.

In its July 2016 Monetary Policy Report, the Bank of Canada noted that "the Canadian economy continues to adjust to low commodity prices," with jobs and investment in Canada shifting somewhat from the resource to the non-resource sector.

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In its spring 2016 Trade Confidence Index Survey, Export Development Canada (EDC) said that 66 per cent of its respondents "believe the lower Canadian dollar has had a positive impact on their export sales, with 40 per cent saying it benefits their business by allowing them to offer their products at lower prices.

"Should the Canadian dollar stay at this survey period's average exchange rate over the next two years, 53 per cent of respondents expect their export sales to increase," the EDC said, and 33 per cent said they would increase their investments abroad.

The Bank of Canada's report also says that the overall economy is poised to benefit from steady foreign demand for goods and services, low interest rates and the drop in the loonie.

While there are lots of other factors to complicate the picture – Brexit, continued low oil prices and more – Canada's non-commodity exports, such as Maison Apothecare's value-added boutique products, are expected to exceed the peak reached before the 2008 recession starting next year.

"We find ourselves partway through two distinct economic narratives," Bank of Canada Governor Stephen Poloz said in June.

"First, the resource economy is going through a painful and complex adjustment to low prices – an adjustment that will mean lower levels of income, investment and employment, as well as the migration of families within Canada. This process will take another couple of years to work itself out.

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"Second, the non-resource economy is still healing from the post-crisis trauma, moving unevenly toward full capacity – two steps forward, one step backward."

It takes time for the low loonie to cast these benefits; the Bank's July report says it will take until next year for non-commodity exports to exceed the peak they reached before the 2008 recession.

"For a company like ours, the lower dollar has already worked in our favour," says Rohit Sethi, chief operating officer of Security Compass, a Toronto-based technology company that helps businesses beef up their software's security.

"We have largely a Canadian-based payroll and American clients. More than half of our revenue comes from the U.S. The only downside is that it makes budgeting more difficult. We have long sales cycles, so at different times we don't always know what the Canadian-dollar value of our deals is going to be."

While it can take time on the macroeconomic level for the effects of a low loonie to filter through Canada's export sector, companies like Mr. Sethi's and Ms. Rey's say they feel the impact more quickly.

"We noticed as soon as the dollar started to drop," Mr. Sethi says, while Ms. Rey says that Maison Apothecare expects to do 20 per cent of its business in exports in the coming year, "which is quite a leap for us."

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