Canadian firms see inflation easing somewhat amid flagging demand
By Steve Scherer and David Ljunggren
OTTAWA (Reuters) -More Canadian firms see inflation easing over the next two years than in the previous quarter, while the business outlook fell to its lowest level since the pandemic, the Bank of Canada said on Monday in a third-quarter survey.
About a third of firms expect a recession over the coming year, the same level as the previous quarter, the survey said.
The Bank of Canada has hiked rates 10 times since early 2022 to fight inflation but left rates at 5% at its Sept. 6 meeting, and noted the economy had entered a period of weaker growth. Its next policy decision is due on Oct. 25.
In a separate survey, 55% of consumers see a recession over the next year, up from 50% in the second quarter. Some 27% of businesses see it taking more than three years to bring inflation down to the central bank's 2% target, down from 32%.
«Reports of softer demand are broad-based,» the survey said. «Signs indicate that pricing behavior is moving toward normal.… A continued softening in demand conditions is creating an environment where firms are less able to pass through input cost increases.»
The business outlook survey index — a broad gauge of how firms feel about their prospects — hit -3.51, the lowest since the -6.16 seen in the second quarter of 2020.
«The Bank of Canada's aggressive rate hikes are working as intended, with both businesses and consumers expecting a slowdown in activity,» BMO Capital Markets economist Shelly Kaushik said in a note.
Some 53% of businesses see inflation remaining above 3% over the next two years, compared with 64% the previous quarter.
Bank of Canada Governor Tiff Macklem said last week officials would weigh whether to let previous hikes work through the
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