Surveys show economy softening, future inflation expectations falling

OTTAWA – New reports from the Bank of Canada suggest business and consumer expectations on inflation are moderating, but a potential recession continues to weigh on economic outlooks.

The surveys released today show inflation expectations are easing, but consumers and businesses continue to expect inflation to remain above two per cent two years from now.

The Bank of Canada closely monitors inflation expectations in the economy over concern that inflation could become stickier if businesses and consumers continue to expect prices to rise rapidly.

The central bank’s surveys reveal consumers with variable-rate mortgages, Indigenous people, people with disabilities and racialized people are more likely to report being hurt by high inflation and interest rates.

With a potential recession looming, the surveys show consumers expect to pull back on spending and businesses anticipate sales to slow.

And while labour shortages are still the second most important issue facing firms, the surveys show signs of easing in the labour market, with businesses no longer anticipating rising wages to push inflation higher.

Feature image by iStock.com/sefa ozel