Their brighter economic outlook doesn’t shine everywhere throughout the U.S.

In my recent presentation to a large group of food processors at Food Trends 2014 in Toronto, I emphasized the brighter economic outlook in the U.S., where Gross Domestic Product (GDP) is projected to grow in 2015 at an annual rate of 2.9% (Bank of Canada).

The most enjoyable part for me during these presentations is the discussion and questions afterwards. And sure enough, someone pointed to an interesting puzzle: If the economy in the U.S. carries such momentum, why are we seeing little pick-up in their food demand?

We need look no further than the purchasing power of U.S. consumers. GDP is a useful summary statistic for economists but less so for food processors, whose success depends a lot more on what consumers are actually able to spend.  

At the moment, the story of median U.S. household income is not rosy. In fact, you might wish to step away now if heights make you dizzy. While the U.S. economy has gained a lot of ground since the 2008 financial crisis and has even expanded, the pattern in U.S. median income suggests that at least half of U.S. households are worse off than they were in 2007. Whatever else we can call the American recovery, “uneven” may be the most fitting description.


U.S. household median income lower

Source: U.S. Bureau of Labor Statistics


What’s the lesson for Canadian food businesses?

It really starts with understanding the preferences and constraints of consumers.

Today, while some food segments grow, we can see others’ sales being limited by consumers who still face economic stress. As the U.S. economy continues to expand and wages grow however, income will grow – and that’s good news for Canadian processors.

The recent drop in the value of the Canadian dollar will help food manufacturers establish and/or maintain a competitive presence among American products. But it’s not a sound strategy to count on a lower loonie for an indefinite time.

When the time comes for more consumer dollars to hit the streets, Canadian products can help to meet the increased appetite for good quality, healthy food options.

Check back here often. We’ve got more coming in the weeks ahead on the impacts to Canadian businesses of global trade.

J.P. Gervais, Chief agricultural economist