NEW YORK — Americans hoping to save on European goods thanks to a falling euro shouldn’t rush to uncork that bottle of Bordeaux. There’s very little to celebrate.
Not since August 2003 has the euro traded this low against the dollar. However, German sports cars, Belgian beers and the latest fashions out of Italy aren’t going on sale any time soon. The reason? There’s simply too much demand in the United States to trigger any markdowns.
“The U.S. economy is the one that’s doing well in the world right now,” IHS senior principal economist George Magliano said. “We’ve got a lot of growth in upper-income families and households.”
Since Americans are willing — and able — to spend heavily on imported goods, there’s no need for companies to cut prices. Any savings as a result of the euro’s decline will instead be pocketed by manufacturers and distributors.
It has been a dramatic fall for the euro. In April, the European currency was trading at $ 1.38 U.S. to 1 euro. That means that $ 1 bought you about 72 euro cents. Now the exchange rate is hovering around $ 1.12 to the euro, so $ 1 buys you 88 euro cents.
The problem for Americans: We don’t buy enough European goods, except for high-end products. Our clothes might come from Bangladesh or Costa Rica. Our furniture from China. And our cars — even foreign brands like Honda — are mostly made at home.
European brands tend to cater to higher-income families who want to buy a bit of prestige.
Among German automakers, Audi sales rose 15 percent last year, while BMW sales were up 6.5 percent and Mercedes rose nearly 10 percent, so don’t expect any price cuts there. It’s the same issue with, fine wines, Gucci handbags and those designer stiletto shoes.
The one bright spot for Americans: Vacations to Europe are now much cheaper.
Thanks to the currency shift, travelers will pay less for hotel rooms, museum admissions and meals out.
“It’s basically a 20 percent-off sale on the whole eurozone for Americans,” says Adam Goldstein, CEO and co-founder of airfare search site Hipmunk.
“We’re already seeing a significant increase in search activity for flights from the U.S. to Europe, which is a leading indicator of travel.”