Inflation expectations of businesses and consumers are rising, according to a survey by the Bank of Canada

Ottawa-Two new reports from the Bank of Canada point to rising inflation expectations by Canadian companies and consumers.

In that business Outlook Investigation The central bank, released Monday, said companies’ expectations for short-term inflation are rising and they expect inflation to be higher for longer than before. Investigation..

“Many companies continue to report plans to raise wages to attract and retain workers,” banks said in a report, hoping that wages and prices will grow at a faster pace. Suggested that.

“More and more companies are referring to rising living costs as an important source of wage growth. Almost half of companies have wages rising above pre-pandemic levels over the next 12 months. I expect it to remain. “

CIBC economists InvestigationMany businesses and consumers have signaled continued shortages, high inflationary pressures, and rising long-term inflation expectations in households, with the Bank of Canada on track to raise interest rates by three-quarters at its next meeting. I am riding on.

“Companies have suggested that higher prices and interest rates could affect the feasibility of investment plans, but that hasn’t happened yet,” said Andrew Grantham and Kareen Charbonault of CIBC. I am writing in the report.

business Outlook Investigation The company also expects sales growth to slow and return to normal with a rapid recovery from the pandemic.

Labor shortages and supply chain bottlenecks continue to be important issues, according to the report, as supply chain problems take longer than previously expected to resolve.

Business accordingly Outlook Investigation Not only are companies restructuring their supply chains and holding more inventories than usual, but the majority of companies are planning more investment and employment, he said.

However, the Bank of Canada said long-term expectations of inflation by companies have been stable between 2-3 percent.

The report also said that capital investment in the energy sector will increase, but is expected to fall below record highs due to investment in new projects that are less robust than the previous commodity price boom.

“After years of financial stress, most producers are taking advantage of the current plunge in income to improve their balance sheets, reduce debt and pay dividends to shareholders,” the report said.

Meanwhile, Canadians in the bank Investigation The proportion of consumer expectations suggests that consumer expectations for inflation are also rising, along with concerns about food, gas and rent prices.

Consumer reports also said expectations for higher inflation and rising interest rates are affecting consumer confidence.

Banks pointed out that low-income Canadians and the elderly are more interested in food prices and rents than young respondents and high-income households.

Consumers, especially low-income earners, said they are adapting to high inflation by cutting spending, deferring large purchases, and looking for cheaper alternative discounts and options.

“Some consumers have mentioned sticking to a tight grocery budget by buying more common products or not buying items that seem less needed. Some people rely on it or use cheaper commuting methods such as bicycles, “the report said.

However, the report also believes that most respondents believe that the Bank of Canada has the credibility and tools to bring inflation back to control, and their ability to reach the bank’s inflation target even before the pandemic. I also found that my beliefs haven’t changed much.

Statistics Canada reported last month that annual inflation in May rose to 7.7%. This is the highest level since 1983.

The Bank of Canada is raising key interest rate targets to bring inflation back to its target of 2%.

The central bank has raised interest rates three times so far this year, raising the key policy rate to 1.5%. The next interest rate decision is set for July 13, and many private sector economists expect the Bank of Canada to raise its key interest rate by three-quarters percentage points.

Nathan Janzen, assistant chief economist at RBC, said the Bank of Canada is concerned that long-term inflation expectations will not be hampered and that it may be more difficult to reach inflation targets. ..

“To prevent the consequences, it’s still a simple call to increase rates from low levels, and today Investigation The central bank will only increase its chances of following the Federal Reserve Board by raising at least 75 basis points in July, “Janzen wrote in a report.

This report by Canadian Press was first published on July 4, 2022.

Inflation expectations of businesses and consumers are rising, according to a survey by the Bank of Canada

Source link Inflation expectations of businesses and consumers are rising, according to a survey by the Bank of Canada

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