Food manufacturing a bright spot in Canadian economy

7 September 2016

An interesting article about Canada's food processing sector and its contribution to the Canadian economy - written by Craig Klemmer, Senior Agricultural Economist with Farm Credit Canada and first published here:

Canada’s manufacturing sector has been faced with a number of challenges over the past 10 years: A super-cycle in commodity prices which caused fluctuations in the value of the Canadian dollar and impacted competitiveness. Slowing labour productivity and aging infrastructure has resulted in tough decisions on plant investment. All of this is occurring at a time when foreign competition is emerging. Despite these challenges, food and beverage manufacturing continues to shine in this difficult economic environment.

Continued growth during economic volatility

In between the commodity booms, the world economy went through a financial crisis that has hampered world growth and created volatility in currency values. Interest rates have also declined and remained near historic lows.

In the midst of this volatile economic environment, Canada’s manufacturing sector slowed. Economic activity reached a low in mid-2009. It has rebounded somewhat, but the Gross Domestic Product (GDP) in overall manufacturing remains 10% below the 2004 level. The economic weight of Canada’s food and beverage manufacturing sector has followed a different path: It has weathered the macro challenges significantly better, with GDP being nearly 23% higher in 2016 compared to January 2004 levels.

Based on growth through May, the food and beverage manufacturing sector is expected to grow 2.6% in 2016 while manufacturing is only expected to expand 0.5% in 2016. According to the Bank of Canada, Canada’s overall economy is expected to grow 1.3% in 2016, more than 1% slower than the food and beverage manufacturing sector.

Largest employer of all Canadian manufacturing

Between 2004 and 2016, average monthly manufacturing employment has decreased 22%, partly because of mechanization, but also due to the decline in economic activity. In comparison, the decline in employment has only been 7% in the food and beverage manufacturing sector.

Consequently, employment in food and beverage manufacturing as a per cent of total manufacturing has increased to from 14% in 2004 to 17% in 2015. The food and beverage manufacturing sector is a bigger employer than the auto manufacturing sector and any other sector of manufacturing.

Food and beverage exports outpacing other manufactured exports

The value of Canada’s food and beverage manufactured exports continues to increase, having grown an average of 4.5% per year from 2004 to 2015, while total manufacturing exports increased an average of 1.5% per year.

Canada’s food and beverage manufacturing sector continues to shine. And that’s despite global disturbances that put a dent in overall Canadian economic performance. Growing food demand abroad and evolving food preferences at home will bring many opportunities for Canadian manufacturing to grow more in the future. And the entire agri-food supply chain will benefit.