Low loonie could kill NHL expansion into Canada, says economist

A new report from Moody’s Analytics suggests our currency woes may soon impact our ability to land expansion teams in Canada.

The current Canadian teams aren’t in danger of moving to the United States because of the loonie, says the author of the report, Alexander Lowy, an associate economist with Moody’s. But Mr. Lowy wonders whether at least some of the seven Canadian teams will have trouble competing for the Stanley Cup because they collect revenue mostly in Canadian dollars while their expenses, like salaries for players, are in greenbacks.

“One of the things that’s interesting looking forward is expansion. Two of the top markets for expansion are a second team in Toronto or moving a team back to Quebec City,” said Mr. Lowy, who is based in Westchester, Pennsylvania, about 40 kilometres west of Philadelphia. “With a weaker currency, it’s possible the league could favour teams in the U.S. with the higher dollar and more purchasing power. Places like Seattle and Las Vegas are always talked about and a weaker loonie hurts the Canadian wing of the league.”

Mr. Lowy notes in his report that a similar phenomenon occurred in the mid-1990s. “As the loonie started trading at 75 cents to the U.S. dollar, financial constraints forced the Winnipeg Jets and Quebec Nordiques to flee south of the border. The reverse of this trend occurred as recently as 2011, when a loonie trading above parity helped bring the Jets back to Winnipeg,” he wrote in the report.

The economist notes most people expect the exchange rate to rebound quickly and doesn’t think any team is in immediate danger of moving though teams in smaller markets that are “cash-strapped” might find it harder to win.

He says with the oil industry slowing down “who knows” how that will affect Alberta’s two teams.

A falling loonie and its impact might not apply to every team in Canada, especially clubs in larger markets such as the Toronto Maple Leafs. “I don’t know if the weaker loonie are the reason the Leafs aren’t going to win the cup,” said Mr. Lowy, with a chuckle.

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