Ongoing supply issues expected to drive prices higher: Bank of Canada survey – National | Globalnews.ca

The global supply chain snags that marked the latter half of 2021 have stretched into the new year and have been worsened by Russia’s invasion of Ukraine, according to a Bank of Canada survey released Monday.

Businesses now expect these persistent snags hampering the flow of goods around the world to drive costs higher in the near term, with most believing inflation relief is still years off.

The central bank’s Business Outlook Survey for the first quarter of 2022 showed a “record high” number of companies are now reporting “capacity pressures” tied to supply chain and labour-related concerns.

The Bank of Canada’s Business Outlook Survey polls senior management from around 100 firms representative of the country’s overall economy.

Though the outlook survey was taken in mid-February — before Russia invaded Ukraine — the Bank of Canada followed up with a supplemental survey to gauge the impact of the eastern European conflict on business confidence.

Roughly half of respondents said they expect to be affected by the war, most commonly through higher cost pressures tied to soaring energy and commodity prices.

Firms do continue to expect strong sales growth, the Bank of Canada said, but at a more moderate pace than the past year.

Businesses that offer in-person, harder-to-distance services are anticipating “significant increases” in sales as COVID-19 restrictions ease.

Businesses surveyed expect average inflation will remain elevated for the next two years, with most firms anticipating inflation will be closer to the central bank’s two per cent target in three years’ time.

Eventual improvement in supply chains and interest rate hikes from the Bank of Canada are cited as the two biggest factors in taming inflation.

Expectations are similar on the consumer side.

The Canadian Survey of Consumer Expectations — a separate report released the same day by the Bank of Canada — shows inflation on household goods, including gas and food, is expected to remain elevated over the next two years.

The bank’s survey shows consumers expect global supply chain issues will “impede authorities’ ability to control inflation.” The war in Ukraine is also cited as a contributing factor to near-term inflation.

More to come.

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