By Chris Elliott, Senior Economist (Jan. 26/15) The sharp drop in oil prices has sent shock waves through the Canadian economy. Oil investment in Western Canada is forecast to plummet by one third or $23 billion.* The Bank of Canada caught the markets off guard on Jan. 21 by cutting its key interest rate due to lower employment and reduced exports. The federal government is gravely concerned about meeting budget targets. And the dreaded R-word keeps cropping up in Alberta and Newfoundland and Labrador. All this can be alarming for the Canadian economy.
Despite the doom and gloom in the headlines, restaurateurs are cautiously optimistic about the future. According to Restaurants Canada’s Restaurant Outlook Survey for Q4, 28% of operators expect sales to accelerate in the first half of 2015. Only 18% anticipate sales will decelerate.
The oil industry may be cutting back on labour, but 85% of foodservice operators are either growing or maintaining their staffing levels. This is the strongest fourth-quarter job outlook since Restaurants Canada began its survey in 2011.
There’s no question oil prices will have a negative impact on parts of the economy. Not surprisingly, Albertan operators will be most affected. Lower prices will curtail economic growth in Alberta, Saskatchewan and Newfoundland and Labrador.
However, most restaurateurs see the falling prices as a plus, especially as it will put more money in the pockets of consumers. Gasoline prices had a negative impact on just one in 10 operators in Q4, the lowest level on record. The drop in gas prices is positive news for consumers, and will hopefully lead to increased discretionary spending at restaurants.
* According to Canadian Association of Petroleum Producers.