Sentiment among Canadian businesses has fallen to its lowest level since the depths of the Covid-19 pandemic, according to a new Bank of Canada survey.
The central bank’s business outlook indicator dropped to a reading of minus -2.2 in the second quarter, down from minus -1.1 previously.
The latest survey found that a growing number of companies think it will take five years or longer for the annual rate of inflation to get back to the Bank of Canada’s 2% annualized target, and that interest rates are likely to remain elevated for an extended period.
Some businesses said they still plan to raise prices in the coming year, and that they haven’t yet finished passing through cost increases they experienced during the pandemic.
While worker shortages remain an issue in manufacturing, construction and retail trade, overall pressures on the job market are easing due to decreased competition for employees.
Businesses also expect wage growth in Canada to moderate from peak levels, with most expecting average annual gains of 4.5% over the next year, a level the Bank of Canada noted is “above normal.”
Canada’s gross domestic product (GDP) registered no growth in April of this year, indicating that the economy is slowing following aggressive interest rate increases by the Bank of Canada.
The central bank most recently raised its benchmark overnight interest rate by 25-basis points to 4.75% on June 7. The Bank of Canada’s next interest rate decision is scheduled for July 12.
