MNI: BOC Says Firms, Households See Hints Of Slower Inflation
Bank of Canada surveys released Monday showed evidence that firms and households see more clues that price inflation is slowing, while employers and workers diverged on the pace of wage growth, coming ahead of next week's decision where Governor Tiff Macklem has suggested more interest-rate cuts could be justified following his opening move in June.
Household expectations for inflation over the next 12 months tumbled to 4.1% in the second quarter from 4.9% in the prior report, the lowest in almost three years. The survey of firms showed some improvement with the share of respondents saying CPI would track between 2% and 3% over the next two years declined to 48% from 54%.
Governor Tiff Macklem cut his key lending rate from the highest since 2001 to 4.75% last month and said officials are paying attention to measures of corporate pricing power and wage bargaining. Most economists see a cut at the July 24 decision though a skip until the September meeting is seen as a close second choice. Today's polls are often less about the hard numbers than the commentary and this edition in several places pointed to more softness in hiring, investment and consumer finances.
"Businesses expect the growth of their input prices and selling prices to slow, suggesting that inflation will continue to decline over the coming year," the overview of the Business Outlook Survey said. "Most firms that made abnormally large price increases in the past 12 months do not plan to do so again in the coming year." Firms polled ahead of the June rate cut expected rate to decline by 50-100bps over the next year.
Firms expected wage increases to average 3.4% over the next year, down from 4.1% and the slowest in three years. In contrast, consumer views of wage hikes rose to the highest in the central bank's polling. Household wage expectations remain below the gains in the business survey. Even though the survey showed some consumers cutting spending due to high interest rates, they see house price inflation quickening over the next year to 5.1% versus 4.8% in the last report.