MNI DATA REACT: Firms See Avoiding BOC's Worst-Case Deflation

By Greg Quinn

     OTTAWA (MNI) - Companies aren't expecting deflation in Canada even as its

major oil producers struggle with a price collapse and demand generally is hit

by shutdowns linked to the coronavirus pandemic.

     The view of firms polled by the Canadian Federation of Independent Business

is more optimistic than the central bank's April 15 projections that the

12-month inflation rate could remain negative into early next year in a

worst-case scenario. Policy makers declined to give a regular forecast, but said

consumer prices would likely stall this quarter.

     The CFIB poll published Wednesday had an average pricing estimate over the

next year of 1.2%, still within the BOC's target range of 1% to 3%. Expected

wage gains will be slower at 0.5%, but that's still resilient after 1 million

people lost their jobs in March and millions are filing for relief payments.

     --EXPECTATIONS 

     The findings are significant for a central bank that was among the most

successful across the major economies before COVID-19 outbreak at keeping price

gains close to a 2% target. That was in part because companies and households

never saw a long phase of sluggish prices that could have sapped expectations

about prices, something that was happening before the pandemic in the U.S. and

Japan. 

     The CFIB's overall Barometer reading at 46 is still about 20 points below a

level that signals a normal economy, and 48% of firms plan to cut full-time

staff. 

     The survey showed 40% of firms expect no changes in prices over the next

year, while 11% saw them up by at least 6%. Some 14% of the respondents said

prices will decline. 

     The BOC cut rates to around zero earlier this month and expanded plans to

buy government and corporate debt to stabilize financial markets. 

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

[TOPICS: M$C$$$]