Canadian restaurant traffic on the rise, despite inflation: NPD Group

The restaurant industry continues to recover in Canada, new NPD Group data show, even as inflation woes and concerns about the economy weigh on consumer spending habits.

NPD Group, a data and marketing research firm, says overall restaurant visits were up 5 per cent in August compared to last year. Spending at restaurants was also up 9 per cent compared to 2021. While dine-in visits slowed in August from the triple-digit growth seen earlier this year, in-person dining was still up 28 per cent year-over-year.

The statistics are still down slightly from pre-pandemic levels, but NPD's foodservice industry analyst Vince Sgabellone says the gap has narrowed to single digits. Restaurant visits, for example, are down 5 per cent compared to August 2019.

"We hear a lot of bad news about the economy and inflation, but so far it hasn't stopped the recovery," Sgabellone said in an interview with Yahoo Finance Canada.

"Things are still increasing and have been since restaurants were able to open back up in February and March of this year... We're edging up towards pre-pandemic levels."

The restaurant industry was among the hardest hit by the COVID-19 pandemic, losing billions of dollars in sales in a period marked by frequent lockdowns.

While traffic levels may be returning, restaurants across the country are still facing major challenges.

A widespread labour shortage remains a key issue, with Restaurants Canada reporting that there were more than 171,000 job vacancies in the foodservice industry in June, a threefold increase from pre-pandemic levels. Restaurants are also grappling with heavy debt burdens, with 35 per cent of independent restaurants surveyed by Restaurants Canada saying they had debt levels greater than $100,000.

Inflation has also made the recovery more challenging for restaurants. The price of food purchased from restaurants was up 7.4 per cent annually in August, according to Statistics Canada's Consumer Price Index.

The restaurant industry recovery may be at risk if the economic situation worsens in Canada. Sgabellone notes that foodservice visits are often one of the first things consumers pull back on when reducing discretionary spending in economic downturns. A Yahoo/Maru Public Opinion poll conducted in July found that 68 per cent of Canadians surveyed were cutting back on dining out at restaurants and ordering takeout in response to red-hot inflation.

But so far, pent-up demand for restaurants still outweighs any fallout related to inflation.

"It's hard to say when economic headwinds may cancel out the tailwinds that is the exuberance over going out to restaurants again," Sgabellone said.

"We've got these two forces against each other and so far the tailwind is winning out and leading to these traffic increases and is net positive for the foodservice industry... It hasn't reversed yet."

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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