Ongoing supply woes expected to drive prices higher: Bank of Canada survey – National

global supply chain The snags that marked the second half of 2021 have spilled over into the new year and have been made worse by Russia’s invasion of Ukraineaccording to a Bank of Canada poll released Monday.

Companies now expect these persistent inconveniences hampering the flow of goods around the world to drive up costs in the short term, and most believe inflation relief is still years away.

the central bank Business Outlook Survey for the first quarter of 2022 showed a “record” number of companies now reporting “capacity pressures” linked to supply chain and labor-related concerns.

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The Bank of Canada Business Outlook Survey surveys the top management of some 100 companies representative of the country’s overall economy.

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Although the outlook survey was conducted in mid-February, before Russia invaded Ukraine, the Bank of Canada followed up with a supplemental survey to gauge the impact of the Eastern European conflict on business confidence.

About half of those surveyed said they expect to be affected by the war, most commonly through higher cost pressures linked to soaring energy and commodity prices.

Businesses continue to expect strong sales growth, the Bank of Canada said, but at a more moderate pace than last year.

Businesses offering in-person and more difficult remote services anticipate “significant increases” in sales as COVID-19 restrictions are relaxed.

Businesses surveyed expect average inflation to remain elevated over the next two years, with most businesses anticipating inflation to be closer to the central bank’s two percent target three years from now.

The eventual improvement in supply chains and interest rate increases from the Bank of Canada are cited as the two most important factors in controlling inflation.

Avery Shenfield, chief economist at CIBC World Markets, said in a note Monday morning that elevated inflation expectations linked to the bank’s business outlook survey “strengthen the case” for a half-point interest rate hike. percentage on your next rate target. decision in a couple of weeks.

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“The bank will be somewhat consoled that respondents see inflation return to target in year three, but the short-term inflationary pressures highlighted in the survey are what make a 50bp move in April seem like a reasonable step. right now,” he said. he wrote her.

Inflation expectations are similar on the consumer side.

The Canadian Survey of Consumer Expectations, a separate report released on the same day by the Bank of Canada, shows that inflation in household items, including gas and food, is expected to remain elevated for the next two years.

The bank’s survey shows consumers expect global supply chain problems to “hinder the authorities’ ability to control inflation.” The war in Ukraine is also cited as a contributing factor to short-term inflation.

More to come.

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