Bank of Canada Survey: Over Half of Businesses Expect Inflation to Exceed 2% Target Rate

Business sentiment across Canada increased to near record levels in the first quarter of 2021, as the economic outlook continues to improve for both domestic and foreign demand. However, along with the boost in optimism, an increasing number of businesses expect annual inflation to exceed the 2% target rate, which could cause selling prices to accelerate even faster.

According to the latest Bank of Canada Business Outlook Survey, business conditions across the country continue to show improvement, as an increasing number of companies become less worried about Covid-19-related uncertainties. The composite gauge of sentiment rose to 2.87 in the first quarter of the year, to the highest in three years and the third highest on records dating back to 2003. The latest reading is up by 1.3 from the previous quarter, and significantly higher from the decade-low of -6.9 recorded during the height of the pandemic a year ago.

Business managers have reported improved sales outlooks and increased investment intentions, but also indicated that capacity constraints were more subdued at historical averages. However, amid the broader positive sentiment, the survey of executives also revealed accelerating inflation expectations. More than half of the survey’s respondents expect inflation to exceed the Bank of Canada’s 2% target rate within the next two years. The respondents attributed their perceptions to strengthening demand and ongoing monetary and fiscal supports.

Moreover, as the Bank of Canada notes, the rising inflationary expectations appear to be widespread across all sectors of the economy. More than half of businesses anticipate positive price pressures will contribute to the growth of their input prices. In particular, commodity-related goods such as building materials, fuel, and agricultural products will the main source of increasing cost growth. As a result, a number of firms across various sectors revealed they plan to raise selling prices at a higher rate relative to the past 12 months.

The results of the survey give rise to expectations that the Bank of Canada will pull back some of its more aggressive monetary policies by the end of April. The central bank’s policy decision is slated for April 21, at which the bank may reduce the rate of its government bond purchases.


Information for this briefing was found via the Bank of Canada. Thee author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

2026 Could Be Gold’s Biggest Year Yet!? | Ryan King – Equinox Gold

Gold Is Screaming Higher While Currencies Burn | Simon Ridgway – Rackla Metals

We Have the Highest-Grade Antimony Deposit in North America!? | Jim Atkinson -Antimony Resources

Recommended

Canadian Copper Secures $8 Million Lead Order From Ocean Partners As Part Of Larger Funding Round

Northern Superior Expands Philibert With 350 Metre Step Out Testing 1.10 g/t Gold Over 25.5 Metres

Related News

US CPI Jumps by Most Since 2009 as Energy Prices Soar

As long as you didn’t buy food or gasoline, use electricity, or pay for shelter,...

Tuesday, April 13, 2021, 12:26:00 PM

Jerome Powell Warns of Ongoing Rate Hikes

Although US inflation is showing signs of easing— albeit slowly, the Fed appears adamant on...

Thursday, February 23, 2023, 03:07:00 PM

‘Extraordinarily Elevated’ US Consumer Prices EXPLODE by Most in 40 Years

Well, here we are, another month come and gone, and another inflation print like no...

Tuesday, April 12, 2022, 10:00:05 AM

Choke Points: The War on Inflation is Getting Pretty Selective

Inflation is too high, so central banks are raising interest rates to try and bring...

Saturday, July 22, 2023, 09:31:20 AM

Jerome Powell at Jackson Hole: Fed Will Continue Raising Rates Regardless of Economic Pain

After finally coming to the realization that it will take a lot more than just...

Monday, August 29, 2022, 02:43:21 PM