Consumers and businesses are increasingly pessimistic about inflation and expect the economic situation to deteriorate. Most believe that the country is entering a recession, according to two surveys published Monday by the Bank of Canada.
Surveys of consumer expectations and business outlook in Canada during the third quarter of 2022 reveal that expectations for short-term inflation remain high.
For their part, consumers believe that supply chain issues will continue and that oil prices will remain high. Five-year-ahead expectations have declined “and are almost back to pre-pandemic levels,” the Bank of Canada noted. However, respondents are more divided on the long-term level of inflation.
Although Canadians are optimistic about labor market conditions, most estimate the probability of a recession to be at least 50%, especially given the decline in wage growth, high prices and the significant increase interest rates.
More than 80% of respondents said they are taking steps to deal with inflation: almost half said they are spending less, and more than a third are sticking to buying essentials. Consumers also say they have changed their shopping habits by buying more discount items or checking flyers more often.
A more moderate price increase
The Bank of Canada's survey reveals that businesses remain optimistic, but that their confidence has eroded since April. Respondents expect their prices to increase more moderately, “due to downward pressures on commodity prices and other production inputs.”
They also provide for wage increases to come down from high levels. Despite everything, a majority of companies intend to continue hiring over the next 12 months. “However, some of these companies indicate that their hiring plans could be jeopardized by difficulties in finding labour, particularly skilled workers,” the Bank of Canada said.
Like consumers, the companies surveyed also believe that the probability of a recession in Canada in the next 12 months is at least 50%.
Remember that the inflation rate has stood at 7% year-over-year in August, down from July's 7.6% rise. According to Statistics Canada, this is the second consecutive slowdown in price growth from one year to the next.
On October 26, the Bank of Canada is expected to increase the rate in order to counter inflation.
Katrine Johns has been a reporter on the news desk since 2013. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining The Gal Post, Katrine Johns worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my firstname.lastname@example.org 1-800-268-7128