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Canadian small business owners plan record price increases of 3.8% over the next year, a challenge for a central bank that sees inflation as temporary and Liberal Prime Minister Justin Trudeau struggling in an election campaign over his claims of helping middle class prosperity.
The average price plans for August reported Thursday in the Canadian Federation of Independent Business Barometer broke the prior record of 3.5% set in June. The indicator has climbed from a low of 1.9% in December, and the group's price figures go back to 2009. The share of firms planning increases of at least 6% has almost tripled to 27% from 10% last August, also the highest since 2009, and another 15% expect price increases of 5%.
Those price gains are outside the Bank of Canada's 1%-3% target for consumer price inflation, and more in line with the last CPI report for July showing the fastest gain in a decade at 3.7%. The BOC last month raised near-term inflation forecasts, affirmed its view that price gains are transitory, while scaling back QE and holding a record low 0.25% interest rate.
The CFIB's overall Barometer of business conditions over the next 12 months fell for a second month in August to 67.1. It reached the highest in a decade in June at 70.1. "The most notable limitation on business growth is the shortage of skilled labor. Almost half of all respondents in August indicated so, which is by far the highest level this indicator has reached since 2009," CFIB senior analyst Andreea Bourgeois wrote in the report.
Source: CFIB
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.