The central bank’s business outlook indicator fell to -2.2 in the second quarter from -1.1 previously. A greater number of firms now think it will take five years or more for inflation to return close to 2 per cent. They see consumer price gains being held up by high government spending and strong demand.
The data show households and businesses are holding up better than expected in the face of the Bank of Canada’s aggressive interest rate increases. Coupled with a string of firmer economic data, the surveys may add to evidence borrowing costs aren’t yet restrictive enough. While business price-setting behavior is gradually shifting closer to normal, some firms are still planning to make larger and more frequent price increases in the coming year. They said they haven’t yet finished passing through the cost increases they experienced during the pandemic.
Workers are still confident about their own employment situation, and their perceived likelihood of losing a job has fallen back to pre-pandemic levels.