Canadian Operators Continue To Buck Economic Slowdown

The Canadian economy has been sputtering since the crash in oil and other commodities prices began in mid- 2014. Real gross domestic product rose only 1.2% in 2015, down from 2.5% the year prior.  Employment and consumer confidence fell through most of 2015. But in spite of the slowdown, restaurant operators have continued to see moderate sales increases. Chris Elliott, senior economist for the foodservice association, Restaurants Canada, headlined his April “Economist’s Notebook” with “Things Are Looking Up: Economic Outlook Brightens But Operators Remain Cautious.”

Elliott noted that the general economic climate “began 2016 on a solid footing.” The Bank of Canada has raised its estimate of 2016 real GDP growth to 1.7% from a forecast of 1.4% in January. (Blue Chip Economic Indicators consensus forecast is 1.6%). Employment trends and consumer confidence are improving and overall retail sales are also rising.

But in spite of the general economic doldrums, substantially more operators surveyed for RC’s Restaurant Outlook Survey have been reporting increasing same-store sales than lower-same store sales throughout the past four quarters. In the first quarter 2016, 45% of operators reported an increase in same-store sales, compared to 23% that said comparable sales decreased. The percentage reporting decreases was the lowest since Q4/2014. The ratio of those expecting increased same-store sales during the next six months also improved, with 32% anticipating increases and 24% decreases. The gap was only 3 points Q4/2015.

Still, Elliott said operators remain cautious. He noted 56% of those surveyed for the first quarter Outlook reported that the weak economy was having a negative impact on their businesses. And the percentage expecting increases in same-store sales first quarter, 32%, compares with 46% expecting increases Q1/2015.

He added that the pain is severe in Alberta, the heart of Canada’s oil patch, and where wildfires have been raging for weeks. Only 4% of survey respondents in Alberta expect same-store sales to increase during the next six months while a whopping 61% anticipate decreases.

While operators may be doing a bit better in Canada, the equipment and supplies market is growing only very slowing. Canadian manufacturers’ reps reported a Q1/2016 sales increase of only 1.5%. (See article this issue.)

The entire RC Restaurant Outlook Survey can be accessed at restaurantscanada.org/en/Restaurant-Outlook-Survey.