4th Quarter 2008 Economic Summary and It’s Impact on Foodservice

 

The Canadian economy took a turn for the worse at the end of 2008, following economic growth in the first three quarters of the year.  Real GDP dropped by 3.4%, the largest quarterly decline in 15 years.  Along with the GDP, consumer confidence dropped by 17 points in the last quarter, bringing confidence levels to historical lows.  Combined with increasing unemployment levels, Canadians are starting to feel the economic uncertainty that has plagued our neighbours for many months.

 

Along with the bad did come some good news that has encouraged worried Canadians to feel optimistic about their financial future.  In addition to steadily declining gas prices (23% decline vs. Q4-07), decreasing mortgage and interest rates have left Canadians feeling they have more money in their pockets than last year.  According to a recent study conducted by the NPD Group, 63% of Canadians agree that Canada is heading for tough economic times, but most believe this is temporary and that the fundamentals are stable.

 

What’s in store for 2009?  Early indicators are showing continued economic decline.  The first two months of 2009 have seen record job losses with over 220,000 jobs lost, driving unemployment rates up to 7.7%.  Continued job losses are expected for the remainder of the year, with unemployment rates expected to reach 8.2% by year end.  The economy is forecasted to remain in contraction throughout 2009, with -2.2% growth.   Economic recovery is expected in 2010, when GDP is expected to grow by 1.4%. 

 

Foodservice Starting To Feel the Pinch

 

The Canadian Restaurant and Foodservice Association has recently issued a downward adjustment to its 2009 industry forecast.  While preliminary 2008 numbers showed decent 1.5% growth in foodservice sales (real growth, adjusted for menu inflation), 2009 is not expected to fare as well.  Early predictions show industry sales to fall by 1.4% in 2009.  When adjusted for menu inflation of 3.2%, real foodservice sales will slip by 4.6%.