some new reports from bank of canada point to rise inflation Expectations of Canadian businesses and consumers.
In its Business Outlook survey released on Monday, the central bank said businesses’ expectations for near-term inflation have risen, and firms expect inflation to last longer than in the previous survey.
“As many companies continue to report plans to raise wages to attract and retain workers, businesses are expected to raise wages and prices at a faster rate,” the bank said in its report.
“Furthermore, a growing number of businesses have cited rising cost of living as an important source of wage growth. Nearly half of firms expect their wage growth to be above pre-pandemic levels even after the next 12 months. Will stay
The report also said that sales growth is expected to slow and normalize after businesses recover rapidly from the pandemic.
As per the report, labor shortage and supply chain bottlenecks are major issues, with supply chain problems taking longer than ever to be resolved.
In response, the Business Outlook survey noted that with businesses reconfiguring supply chains and holding more inventory than usual, most companies plan to invest and hire more.
However, the Bank of Canada said that long-term expectations of inflation by businesses remain stable between two and three percent.
Meanwhile, the Bank of Canada’s Consumer Expectations Survey shows that consumers’ inflation expectations have risen along with concerns about food, gas and rent prices.
Consumer Reports also said that expectations of higher inflation and rising interest rates are eroding consumer confidence.
The bank noted that low-income Canadians and older individuals are more concerned about grocery prices and rents than higher-income younger respondents and households.
It said consumers, especially those with low incomes, are adjusting to high inflation by cutting spending, postponing large purchases, discounting for cheaper options and looking for alternatives.
“Some consumers noted adhering to a strict budget for groceries by buying more generic products or not buying items deemed less essential. Some are more dependent on gardening for food or using cheap means like biking,” the report said.
However, the report also found that a majority of respondents feel that the Bank of Canada has the credibility and tools to bring inflation under control and that the bank needs to achieve its inflation target before the pandemic materialises. He believes in ability. Not much has changed.
Statistics Canada reported last month that the annual pace of inflation for May rose to 7.7 percent, the highest level since 1983.
The Bank of Canada is raising its key interest rate target in an effort to bring inflation back to the 2 percent target.
The central bank has raised rates three times so far this year to reduce its key policy rate to 1.5 per cent. Its next interest rate decision is set for July 13 and many private sector economists expect the Bank of Canada to raise its key rate by three-quarters of a percent.
Royal Bank assistant chief economist Nathan Janzen said in a note Monday morning that the central bank’s release “only increases the odds” of a 75-basis-point move next week.
— With files from Craig Lord of Global News