For much of the last decade, the Canadian dollar enjoyed a steady rise in value. When it moved from less than 70 cents (U.S.) to parity and higher in 2011, the loonie's standing was thought to signal Canada's strength in commodities, and a reorientation to a petro economy, against the backdrop of a U.S. economy beset by debt. As virtuous a scenario as it seemed, many were calling for the Canadian dollar to cool off. In 2014 that prediction came true, and in the opinion of the C Suite, it's welcome news.
Most executivesof the C Suite believe the lower valuation of the dollar is a good thing for Canada's economy. Resource executives are even more enthusiastic about a 90-cent (U.S.) dollar than manufacturing executives. Like the economists who argued the dollar was overvalued, the C Suite is concerned about some of the fundamentals. Exports and commodities markets are weak. The outlook for the economy is not close to the optimism of a decade ago. Again this quarter, C-Suite survey respondents expect slightly better returns for the U.S. economy, while almost none predict strong growth for Canada.
In short, executives are looking for something to pump more life into the economy. Many are looking to the Bank of Canada to put stimulating the economy at the top of its priority list. Underscoring their concern is the need for more economic sectors to become drivers of growth. Even many resources executives share the concern that we cannot continue rely on commodities as we have.
Much of the C Suite is interested in, and concerned about, the fate of Canada's manufacturers. Despite high-profile plant closings, few are ready to say manufacturing is no longer important to the discussion about Canada's economy and monetary policy. Even those in the services sector – and others who said the currency's slide meant little to their companies – say the lower dollar is good for the economy.
There is a separate discussion to be had about whether, and when, a weak dollar poses serious problems for companies and consumers when it comes to purchasing power. By no means are we hearing a call for a 70-cent dollar. Some already report they have been negatively affected by rising input costs. But somewhat more have put in place hedging strategies to mitigate currency fluctuations.
For most, a Canadian dollar at about 90 cents is either positive or has had no impact on their companies. And companies are planning on the basis of a loonie in its current range.
Finally, it's important to consider what's behind the lower dollar. The C Suite believes it is partly driven by central bank policies in the United States, and to a lesser extent in Canada. But the performance of the U.S. economy is the most important factor. That is another reason for hope, as executives continue to look for something to get all cylinders of the economy firing.
David Herle is principal and Alex Swann is vice-president of Gandalf Group.