The Globe and Mail reports in its Tuesday, Oct. 18, edition that the Bank of Canada published a pair of quarterly surveys on Monday showing a sharp drop in business and consumer confidence about the economy as interest rates rise. The Globe's Mark Rendell writes that both businesses and consumers said they expect inflation to remain high in the coming years. There were, however, some positive signs that conditions that are forcing price increases are easing for businesses, which suggest Canada is so far avoiding the worst-case scenario of a wage-price spiral.
The business outlook indicator, which captures how companies feel about future sales, investment and hiring, had its biggest quarterly drop since the early months of the COVID-19 pandemic. Companies connected with the housing sector were particularly downbeat. The survey of about 100 companies was conducted from mid-August to mid-September. The consumer survey, conducted in mid-August, found that most respondents do not think their wages will keep pace with inflation, and many have begun cutting back on spending. Nearly 80 per cent said the chance of a recession in Canada within the next year is at least 50 per cent.
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