Business

For Mass., a weaker euro offers mixed blessing

The euro’s plunge is a boon for vacationers, but a bust for the state’s exporters

A Paris hotel room that went for the equivalent of $350 a night a decade ago would now cost less than $280.

Pierre Suu/Getty Images

A Paris hotel room that went for the equivalent of $350 a night a decade ago would now cost less than $280.

Sipping wine from a villa on the Mediterranean, or even buying that villa, just got easier. Selling machinery, medical devices, and other Massachusetts products in Europe just got tougher.

The value of the euro has plunged toward its lowest level in a decade, approaching a one-to-one exchange rate with the dollar. So a Paris hotel room that went for the equivalent of $350 a night would now cost less than $280.

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But the weakening euro, or, if you prefer, the strengthening dollar, comes with a painful trade-off: Companies that export to Europe must deal with their products costing more overseas, requiring some to cut prices and profit margins to compete with French, German, or Italian rivals.

The situation not only challenges individual companies, but also the state’s economy. Europe is the largest overseas market for Massachusetts, which last year exported more than $6 billion in merchandise to countries using the euro.

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Massachusetts exports to the eurozone fell sharply in December and January, declining 15 and 13 percent, respectively, from a year earlier, according to the most recent data from WISERTrade, a nonprofit economic research group based in Leverett.

“This is an unwelcome event for exporters for sure,” said Paula Murphy, director of the Massachusetts Export Center, a nonprofit that works with local companies that want to sell internationally.

The euro, the common currency of 19 European nations, dropped more than 20 percent against the dollar over the past year, trading Friday in currency markets at $1.08, compared with $1.38 a year ago.

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Alan M. Krensky, chief executive of Krensky Colpitts World Travel in Norwood, said his bookings to Europe are up 10 percent in recent months. Particularly popular is Italy’s Amalfi Coast. “People are going to do some shopping sprees in Europe,” Krensky said.

Europe is an important market for many of the state’s leading industries, including technology, biotechnology, and medical devices, according to WISERTrade’s data. In January, sales of medical devices, such as surgical instruments, imaging machines, and blood pressure monitors, fell more than 7 percent in euro countries compared with a year earlier.

“The drop in the euro will have an impact on these companies,” said Tom Sommer, president of the Massachusetts Medical Device Industry Council, a trade group. “It may be too early to tell what the long-term impact will be.”

Other industries worry, too. Econocorp Inc., a Randolph company that manufactures machines that make boxes and packaging, said the buying climate in Europe has soured in recent weeks as distributors consider cutting back on US products made more costly by the exchange rate.

Justin Kirkpatrick, director of export sales for the company, said some European distributors that buy Econocorp’s machines have told him that the weaker euro has made “many products imported from the USA noncompetitive.”

It hasn’t affected Econocorp’s sales yet, Kirkpatrick said, but it means the company’s customers could ask for discounts, or buy from European manufacturers of similar products.

“It’s been very difficult and very challenging,” he said. “Normally we’ve always had an advantage because of price.”

A one-to-one exchange rate between the dollar and the euro is a rare occurrence. It happened in 1999, when the euro was launched, and again in 2000 and 2002.

The euro has faltered recently along with the region’s economy, which has led the European Central Bank to launch an aggressive stimulus plan that includes buying more than $1 trillion in bonds to pump money into the economy.

Economists equate the bond-buying program — similar to the “quantitative easing” ended by the Federal Reserve last year — to printing money, which devalues a currency.

At the same time the US economy has gained momentum, leading the Fed to unwind its stimulus programs and prepare to raise short-term interest rates. That, in turn, has led to a stronger dollar, economists said. US unemployment, at 5.5 percent, is half of Europe’s 11 percent jobless rate.

When the euro was strong — it hit $1.60 in April 2008 — it was common to see busloads of European travelers at New England outlet malls. Europeans accounted for 55 percent of the 1.6 million international visitors to Boston last year, according to the Greater Boston Convention and Visitors Bureau. Canadians made up 25 percent.

Most will continue to come to Massachusetts this year, having booked and paid for the trip well in advance, said Patrick Moscaritolo, president of the regional marketing bureau. On the downside, he said, they might eat out or shop less because their money buys less.

“He or she will probably experience sticker shock,” Moscaritolo said.

Local consumers, however, may enjoy lower prices on European goods, which become cheaper here when the dollar is stronger. Brett Vankoski, co-founder of 90+ Cellars, a Boston-based discount wine seller that buys excess production from top wineries and puts its own label on it.

He said the company is buying pricier French champagnes and Tuscan reds to bring back to the United States because the dollar goes so much farther in Europe.

While some of those wines normally retail for about $50 a bottle, 90+ can sell them for about $30 because of the favorable exchange rate, he said. Vankoski said many European wines that typically sell for $10 to $30 a bottle will offer the biggest values.

“Reductions could be significant,” he said. “Hopefully more people will be trading up and getting a very good deal on a very classy bottle of wine.”

Megan Woolhouse can be reached at megan.woolhouse@ globe.com. Follow her on Twitter @megwoolhouse.
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