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MNI REALITY CHECK: Canadian Cos Face Weak Sales, Cost Pressure

MNI (Ottawa)
OTTAWA (MNI)

Canadian executives tell MNI they face competing forces amid renewed pandemic lockdowns that hurt sales and drive up costs, pressures that so far have been keeping a lid on inflation.

Consumer prices likely rose 1% in December from a year ago, economists polled by MNI predict a Statistics Canada report due Wednesday at 8:30 am Eastern time will show. While the inflation rate has quickened from 0.1% in August and is now the fastest since February of last year, the pace is at the bottom of the central bank's target band.

Restrictions in Ontario and Quebec this month suggest continued weakness in demand with reduced travel to jobs and many businesses closed, executives told MNI:

David Adams, President, Global Automakers of Canada:

  • January looks like a poor month for sales and potentially the first quarter too. Companies may use aggressive incentives to bring consumers back to the market and meet sales targets, he said.
  • "January is fairly a bad month, due to restrictions in both Ontario and Quebec, which is going to exacerbate sales", Adams said.
  • Prices had been fairly strong, due to factors like having lower inventory for much of last year and increased demand.
  • "After the pandemic, we saw the segment of the population come into the market that we wouldn't expect, these are the folks that they would normally use public transportation as a choice, but with Covid, this made them be more concerned about their personal safety."
  • Sales fell 20% last year, though this year will likely be better.
  • The market is still shifting in response to Covid, as some people moving outside of big cities need an extra vehicle, he said. Many people are also shifting to online shopping for cars.

Paul Hetherington President, Baking Association of Canada:

  • "The challenge for the industry is the substantial reduction of foodservice and hospitality," Hetherington said.
  • The recent stay-home restrictions create confusion about what is an essential worker, which can hurt deliveries of ingredients and finished products. Companies are narrowing how many products they are offering.
  • There are increased costs for trucking, buying personal safety equipment, and reorganizing plant floors to have workers socially distanced.
  • About 95% of production is shipped to the U.S., and border restrictions make filling orders harder.

Martin Vezina, Manager, Communication, Association Restauration Quebec:

  • Prices have increased because of higher costs to meet safety requirements.
  • "In December, because there were no Christmas parties and office parties that we normally see," he said, "we are waiting and paying our expenses."
  • Many restaurants have invested in delivery services, including higher-end establishments. Before the pandemic take out was about 30% of industry sales.
  • Keeping workers is one of the main challenges, as people are willing to work somewhere else with more stability in the future.
MNI Ottawa Bureau | +1 613-981-1671 | anahita.alinejad.ext@marketnews.com

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