— More Firms in Canada See Above 3% Inflation Over 2 Years
By Max Sato
(MaceNews) – Sentiment among companies in Canada, particularly those in the services sector, continued to pick up in the July-September quarter on expectations of a gradual reopening of the economy and national borders, the Bank of Canada’s quarterly Business Outlook Survey released Monday showed.
At the same time, some manufacturers including the auto and electronics industries face worsening supply chain disruptions as a resurgence in Covid-19 cases prompted lockdowns in key Southeast Asian production hubs, such as Vietnam and Malaysia.
The BOC survey showed that its sentiment index rose to 4.73 in the third quarter from 3.96 in the second quarter and minus 2.10 in July-September last year.
Supply constraints are “more prevalent and have worsened since last quarter,” the bank said, and many firms expect them to “persist until the second half of 2022.” Labour shortages have also intensified from last year when pandemic-related unemployment was high, it noted.
More firms plan to increase investment in equipment to meet pent-up demand and alleviate labor shortages while employment intentions remain at record-high levels, the survey showed.
Inflation expectations among businesses are rising, with 45% of those polled foreseeing inflation above 3%, the top end of the BOC’s 1-3% inflation target, over the next two years in the July-September survey, up from 35% in April-June. “The majority of businesses anticipating inflation above 2% believe that the drivers of higher inflation are temporary,” the bank said.