BoC business survey shows labour as big of a concern as supply chain issues: Economist
The Bank of Canada is getting a pair of key indicators this week ahead of a rate decision next Wednesday that's virtually a coin toss, as far as markets are concerned.
The latest Business Outlook Survey on Monday provided a snapshot of how senior leaders from approximately 100 firms across the country were feeling about the economy and their own business fundamentals in the fourth quarter of last year.
Suffice to say, the sentiment confirms what many already know: Canada is facing labour and inflation problems.
To wit: 67 per cent of respondents said they expect the annual rate of inflation will exceed three per cent over the next two years. Moreover, almost eight in 10 respondents (78 per cent) said they’d have either some or significant difficulty meeting an unexpected increase in demand.
It’s important to point out, however, that the survey was conducted from Nov. 15 to Dec. 6, and so it fails to capture the full impact of the Omicron variant of COVID-19.
“The Bank of Canada’s latest survey told us what we already knew: business leaders had widespread optimism on growth, and trepidation about wage and price inflation, just before the omicron wave hit,” wrote CIBC World Markets Chief Economist Avery Shenfeld in a report to clients Monday.
“Although Omicron will dent the start of 2022 and the uncertainties on how long that will last could keep the Bank from hiking this month, assuming we’re waving goodbye to it in March, that will set the stage for a first hike no later than April.”
Meanwhile, Statistics Canada will release the consumer price index for December on Wednesday. Economists are expecting to see inflation rose 4.8 per cent year-over-year in the month; that would be the fastest rate of growth since 1991.
By early afternoon Monday, market data were showing investors see a 66 per cent chance of a rate hike when the Bank of Canada delivers its decision on Jan. 26.