January 18, 2008
Weak U.S. dollar hurts Boise businesses who depend on overseas products
Boise shops must pay more for items from Scotland, Basque Country
John McDade believes people will "always pay a little more for a taste of home." But how much more?
For 10 years McDade, owner of Wee Bit O' Scotland in Boise, has offered that feeling of home to shoppers who visit his store looking for everything from bagpipes and hand-made kilts to fish sticks and tea.
But like most Idaho businesses dependent on imports, McDade's is battered by an increasingly weak dollar. The weak dollar increases his costs because it takes more American dollars to buy products from countries whose currency values are rising.
U.S. companies that ship products abroad benefit from the weak dollar because it takes less foreign currency to buy U.S. goods. That creates a stronger market for exports.
The dollar has lost about 28 percent of its value against the euro in the past five years, and on Thursday, it took $1.97 to buy a British pound.
The result: McDade says a package of 16 British fish sticks, or fish fingers as they're known in England, now costs $15 at his shop. The kilts he once sold for $350 now go for $550. The Flake chocolate bar manufactured by Cadbury in the United Kingdom and that sells for $1.25 in his store can't compete with a similar bar of milk chocolate manufactured in the U.S. by Hershey's that can be purchased at Albertsons for as little as 80 cents.
"I don't know the answer to the question about how much people will be willing to pay," said McDade, who was born in Glasgow, Scotland. "I don't know whether to continue or just pick up sticks and move on."
He doesn't yet know how much the weak dollar affected his revenues last year, but "my gut tells me it's going to be down a little."
The future does not look bright for small specialty stores like McDade's.
The dollar will come under increasing downward pressure as the Federal Reserve slashes interest rates to spur a sputtering U.S. economy, said Don Holley, an economics professor at Boise State University.
Foreign countries that have been buying dollars because of the higher interest rates they were getting will be less inclined to buy the U.S. currency. They could even sell off their dollars, dumping more on an already depressed market.
And more countries will invest in euros as the promise of a single currency covering several European countries offers more stability, he said.
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