Outlook for 2016: An economist’s dilemma

Published February 8, 2016

Between oil prices and the stock market, there’s a lot of uncertainty about what lies ahead for the Canadian economy.   Even the major economic forecasters can’t agree, since they’re predicting real GDP growth rates of anywhere between 1.0% and 2.2%.

Consumer spending, oil prices, and the impact of a lower Canadian dollar on imports – economists aren’t agreeing on any of it. Adding to the confusion is how sluggish economic activity in emerging markets such as China, Russia and Brazil may affect the Canadian economy.

What economists do agree on – kinda – is that we’re in for a bumpy ride, perhaps in the short term.  Maybe.

It isn’t surprising that all this uncertainty is bad for business and consumer confidence, which usually leads to a self-fulfilling prophecy of weaker economic growth.  So what does this mean for the foodservice industry?

Restaurant operators are equally mixed about what the future holds.  According to the Q4 Restaurant Outlook Survey, 30% of respondents expect their sales to grow in the first half of 2016, while 27% expect sales to decline.  Alberta is the only province showing a consensus – a staggering 76% of respondents expect sales to slow in 2016.

Restaurants Canada recently issued a revised national forecast predicting commercial foodservice sales to grow by 3.5% in 2016.  This forecast is based on the latest economic indicators from the Conference Board of Canada, and includes other indicators such as disposable income, the unemployment rate and the exchange rate.

The 3.5% forecast is a downward revision from our previous forecast of 3.8% growth. It would represent a decline, after average annual growth of 4.3% over the last five years.  A moderation in spending in British Columbia and Ontario, slower disposable income growth, and high household debt would all be responsible for this downturn.

Quick-service restaurants will post the strongest gains with sales climbing by 3.9% as consumers look for value.  This will be followed by caterers (+3.8%) and full-service restaurants (+3.5%).  Drinking places will post another drop in sales (-2.1%) due to weak consumer demand and unit closures.

Restaurants Canada Digital

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