FCC Food and Beverage report providing optimism for margin improvement
A change in consumer spending habits, lower commodity prices, and inflation all factor into Farm Credit Canada’s (FCC) outlook for food and beverage manufacturers.
In its annual Food & Beverage Report, FCC is forecasting a slight drop of 1.4 per cent in manufacturing sales this year to $162.6-billion.
Desmond Sobool, Director of Economics and Deputy Chief Economist with FCC, said the forecast is not a surprise. The report said ‘high inflation of the last two years and the corresponding interest rate increases meant to combat it are stretching household budgets. The spending of the massive amount of savings accumulated during the pandemic has slowed as household budgets tighten amid a slowing economy, and debt-servicing levels (as a percentage of disposable income) are at a record high. This has left less for consumers to spend on discretionary and higher-priced items.’
“We’re seeing inflation come down and that’s actually moderating sales. So, it’s not surprising where we’re at this year. Our forecast for this year is that sales will be lower than last year. It’s still higher historically. So, that’s good news for the sector even thought it’s a little bit of moderation – the trend is still upward,” said Sobool.