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Recent restrictions triggered by the spread of the Omicron variant will keep record wage and price inflation at elevated levels in coming months, and those pressures will likely be reflected in the late January Canadian Federation of Independent Business "Barometer," according to the analyst behind the influential survey.

Increases are being driven by higher shipping costs amid the supply crunch, payroll tax hikes that took effect Jan. 1 and wage raises needed to attract workers, research Vice President Simon Gaudreault of the country's main small business lobby group told MNI in a phone interview Monday.

Firms with "their backs against the wall" are also seeking to pass on rising costs from their own suppliers, he added.

"What our members have been telling us is that it's very difficult for them to keep going and to stay motivated because it's one step forward, one or two steps back," he said. "That's probably the state of mind that we can expect small business owners to be in a when they answer the survey in January."

The December survey showed firms planned to raise prices 4.6% over the next year. Wages were seen gaining 3%, up from 1.2% at the start of 2021.


Gaudreault said pressures “aren’t going away, according to what we’re seeing in the data,” and firms are adjusting prices quickly to adapt to circumstances, with higher energy and insurance costs additional irritants.

The Bank of Canada is committed to bringing inflation back into its 1-3% target band, with CPI expected to slow to about 2% later this year. After almost a year of inflation above target and rates at a record low 0.25%, the BOC is set to raise rates as early as April.

"If the central bank is sticking to its mandate and willing to do what it takes to bring inflation to within its target range" that would create more certainty and "you probably could expect business owners to be to be happy with that," Gaudreault said.

Source: CFIB


As for wage trends, Gaudreault said some companies are reporting interview no-shows and job advertisements that get no responses at all. The pandemic has hurt labor supply by reducing immigration and accelerating retirements, he said, further draining an aging workforce, reflected by job vacancies at record highs.

Governments could encourage older workers by giving them a tax break if they return, he added, on top of an earlier move to nudge people by scaling back pandemic relief checks.

"You have widespread labor shortages also and if businesses are responding by increasing wages that will be reflected through prices," Gaudreault said.

Gaudreault spoke from Montreal, where Quebec's provincial government re-introduced a curfew as Covid cases shatter previous records. CFIB may return to faster or more frequent data releases if the national situation worsens further, he said. The group with 95,000 members published biweekly Barometer reports earlier in the pandemic.