Sep 26, 2016
Pattie Lovett-Reid: Grocery prices are falling, so why isn’t everyone cheering?
Get ready to pay less at the grocery store.
According to Sylvain Charlebois, a business and economics professor at Dalhousie University, grocery prices are dropping in every province (with the exception of Alberta) due to excess inventories for many products and a more competitive food distribution landscape.
The Canadian dollar has held steady over the last few months, keeping prices for fruits and vegetables lower in stores. So, if you see an $8 cauliflower, it’s probably wise to walk away from the premises immediately. Yet, not all products will be cheaper: chicken prices have increased while the beef and pork costs are dropping.
We are also slowly changing where we buy food: Charlebois’ report says food sales were up in convenience stores, while food specialty shops dropped by more than 1.5 per cent – and a lot of that has to do with economic headwinds.
Supermarket sales remain robust with an increase of 1.6 per cent since last year. However, according to the report, gains by traditional grocers are likely due to creative and novel ways of adding value to food products. Offering more single servings, promoting more functional foods for health-conscious consumers or even sales of ethnic foods have picked up in recent months. Increased volume sales are not helping grocers grow their top-line, so they need to find other ways.
While investors banking on the food business may be grappling with the changes, consumers are likely cheering the cheaper grocery prices given that many Canadians are living so close to the margin.
With the debt-to-disposable income ratio at a record high, a tepid job market and housing prices out of reach for many people in the Toronto and Vancouver areas, savings at the grocery store will be a welcome relief.
Given we get our first read of Canada’s gross domestic product for the third quarter as July’s numbers are set to be released on Friday, you can be sure the Bank of Canada will be watching to see if the tepid growth from the second quarter is starting to alter course.
In an ideal situation, growth with a little inflation would take the pressure off the need to cut rates further. While consumers will cheer lower food prices, Bank of Canada Governor Stephen Poloz isn’t likely to be joining them.
As the Chief Financial Commentator for CTV News, Pattie Lovett-Reid gives viewers an informed opinion of the Canadian financial climate. Follow her on Twitter @PattieCTV
