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Bank Of Canada Survey Reveals Canadians Are Worried Inflation Will Stay High For Longer

The BOS indicator remains elevated amid increased uncertainty

The BOS indicator has stayed high in the second quarter (Chart 1). Businesses continue to view capacity pressures as elevated, and they expect wages and prices to grow at a faster pace. Improvements in firms’ sales indicators suggest ongoing sales growth ahead and support their plans to invest more and hire.

Increased uncertainty about the economic environment was an emerging theme in both the BOS and the BLP. The sources of uncertainty include the:

Most firms saw this uncertainty as creating risks to their outlook but not yet further affecting their operations or sales expectations.

Firms expect strong but somewhat slower sales growth

Expectations that sales growth will moderate are widespread (Chart 2, blue bars). Firms largely attribute this softening to a shift toward normal demand conditions—after an exceptionally rapid recovery from the pandemic for some. Still, these businesses continue to expect strong growth, supported by improved order books and increased sales inquiries from domestic and foreign customers (Chart 2, red line). Businesses with slowing sales growth are mainly linked to housing, natural resources and transportation. Some firms also anticipate that labour-related constraints will limit their sales growth.

Other businesses expect their sales to grow faster over the next year. These include firms that were hit hard during the pandemic, such as those tied to hard-to-distance services. They attribute their positive outlook to eased restrictions and pent-up demand.

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