Second of two parts
The restaurant industry was among the most vocal opponents to the harmonized sales tax (HST) five years ago. Implementing the tax at a challenging time for the sector was one of the reasons it was so vocal (see “PST – The Sequel: six month report card” – BIV issue 1249; October 1-7). But it would be hard for the industry to claim the HST was the main culprit among the industry’s economic challenges.
According to Statistics Canada data, food service receipts started to rise seven months into the short-lived HST era in B.C.
“Over time, people adjusted to the additional tax on restaurants,” said Ken Peacock, Business Council of BC chief economist, “so over time, you saw consumer spending in restaurants come back.”
Sales have continued to rise more sharply since the return of the PST in July.
“But to say it was attributable to the HST being removed is a bit of a stretch,” said Peacock.
Despite the current surge in restaurant spending by B.C. residents, Peacock noted that restaurant sales growth in B.C. has remained among the worst in Canada.
Restaurant sales have risen about 12% in B.C. since January 2007, but they’re up 29% in Alberta and Ontario, 31% in Quebec and Manitoba and 50% in Saskatchewan during the same period.
The significant sales growth in Saskatchewan and Alberta is largely because both economies are doing extremely well.
“They are really in a sweet spot,” said Peacock.
But the relatively larger sales gains in Ontario and Quebec versus B.C. suggest the industry in Canada’s Asia Pacific gateway faces underlying challenges unique to the province. Peacock suggested relatively high household debt is likely the biggest reason restaurant spending is lower in B.C.
“They probably have larger mortgage payments than most other people. You couple that with the fact that you’ve had weaker wage increases over the past decade or so than other provinces; those have been factors.”
Restaurant sales have trended much higher in recent months, suggesting B.C. residents are willing to spend more of their discretionary income experiencing the province’s diverse gastronomic delights. Low interest rates are helping debt-laden households. But, with housing prices remaining near record levels, restaurateurs will still be facing cautious consumers. •
