How would you rate current business conditions?
- Sentiment fell every month in Q4, from 22% at the start of the quarter to 9% at the end
- 38% of firms expect a recession in the year ahead vs 33% in Q3
- 54% of firms expect inflation to remain above 3% for the next two years vs 53% in Q3
- 75% of firms think wage growth will be back to normal by 2025
- Consumer survey inflation expectations for 5 years to 2.62% from 2.75%
- Future sales 20% vs 14%
- Indicators of future sales vs a year ago -10% vs 0% prior
- Firms see slight improvement in labor availability
Spike in companies saying that business decreased
Wage growth metrics are improving.
Inflation expectations from firms.
In the consumer survey, note that 5-year inflation expectations are below pre-covid levels.
The survey also showed that consumers are increasingly lowering spending because of inflation and interest rates.
All told, I see plenty of reasons in this survey for the Bank of Canada to cut rates. They meet next week and could very well signal a looming easing cycle. That said, I think they want to snuff out inflation completely rather than get ahead of slowing growth. That will ultimately prove to be a mistake.