It will not be a sad farewell to 2015 – at least from an economic perspective. Canada’s economy began the year on a sour note, slipping into a technical recession in the first half of the year. While economists expect an improvement in the second half, there remains a significant amount of slack in the economy.
Real GDP is now forecast to grow by 1.6% this year, which remains below potential. As a result, Canadians have had to cope with a lot of uncertainty.
One way to look at the uncertainty is the Conference Board of Canada’s consumer confidence index. As the bad economic news made newspaper headlines, consumer confidence zigzagged up and down as Canadians tried to make sense of the impact on their jobs and finances.
By October, confidence had fallen to 95.3 from 107 points in January 2015. Even six years after the 2009 recession, consumer confidence is nowhere near pre-recession levels.
Economy sours in 2015
Following a 2.4% increase in Canada’s real GDP in 2014, Canada’s economy was forecast to improve to 2.7% growth in 2015. Instead, oil prices plummeted and the United States economy faltered. This pushed Canada’s economy into a mild recession. While things will improve in the second half of the year, annual economic growth will be just 1.6% in 2015, the slowest pace since 2009.
Along with weaker economic activity, net job creation is expected to climb by a tepid 142,000 workers in 2015. This is well below the 320,000 that was initially forecast.
From the household perspective, wealth has been volatile as the stock market has been rocked by global economic challenges – from the decline in oil prices to a weaker Chinese economy.
Will 2016 bring a sweeter taste?
Looking ahead, 2016 should be a much better year for Canadians with real GDP forecast to advance by 2.1%. Employment is projected to climb by nearly 200,000 jobs. After a disappointing 2015, retail sales are expected to climb by 3.8%, although this is still a relatively weak pace.
For foodservice operators, the uncertainty is not just from the revenue side and how much Canadians will spend at restaurants. Uncertainty is also the result of rising costs due to a lower Canadian dollar. With the decline in the loonie, some imported vegetables and fruits have experienced double-digit price increases.
As economic conditions settle down, there will be more stability in the Canadian dollar – and job market – and this will lead to improved consumer confidence and healthy spending at restaurants. That’s the fine balance of sweet and sour flavour we crave.