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Yahoo
2 days ago
- Business
- Yahoo
Bank of Canada says inflation expectations easing as businesses hold off passing on tariff price hikes
Short-term inflation expectations for Canadian firms eased during the second quarter, as slower demand offsets cost pressures caused by tariffs, according to the Bank of Canada surveys released on Monday. Firms' expectations for the annual inflation rate fell to just under three per cent in June, compared to 3.7 per cent in April. Still, 34 per cent of businesses expect their input prices to increase at a greater rate than the past year, while 25 per cent expect prices to increase at a lesser rate. Despite these rising costs, businesses do not expect their prices to increase at a faster rate, with selling prices expected to rise at a similar rate as in the last 12 months. 'Tariff-related cost increases are also putting upward pressure on firms' expected selling prices,' said the report. 'But competitive pressures and the current weakness in demand are limiting firms' ability to pass on these costs to consumers.' The majority of firms are absorbing tariff-related costs by reducing their margins and finding efficiencies, in an effort to preserve market share. The slower demand is driven by consumers putting off large purchases and cutting back on spending, with the consumer spending index falling for a second consecutive quarter. The three main reasons for this cutback in spending include economic uncertainty, elevated housing costs and high prices for many goods and services. The potential pass-through of tariff-related costs from businesses to consumers has been a particular focus for the Bank of Canada, which continues to monitor how inflation expectations are evolving in the Canadian economy. Core inflation has hovered around three per cent since April and was a factor in its decision to hold the policy rate at 2.75 per cent in June. Bank of Canada governor Tiff Macklem said in a speech last month that consumer prices will rise, unless tariffs are removed. Bank of Montreal senior economist Shelly Kaushik said this latest round of surveys does nothing to change market expectations that the central bank will hold its policy rate at its next decision on July 30. 'Tariffs continue to hang over business and consumer sentiment, even if uncertainty dissipated through the latter half of the second quarter,' she said in a note to clients. 'Altogether, there's not much here to push the Bank of Canada off the sidelines at next week's meeting.' Bank of Montreal senior economist Shelly Kaushik said this latest round of surveys does nothing to change market expectations that the central bank will hold its policy rate at its next decision on July 30. 'Tariffs continue to hang over business and consumer sentiment, even if uncertainty dissipated through the latter half of the second quarter,' she said, in a note to clients. 'Altogether, there's not much here to push the Bank of Canada off the sidelines at next week's meeting.' Inflation expectations for Canadian consumers, meanwhile, remain elevated, with consumers expecting the annual inflation rate to be over four per cent over the next year. In particular, Canadians expect large increases in motor vehicle prices over the next 12 months. These expectations are as high as after the COVID-19 pandemic when the industry faced major supply disruptions. Latest inflation numbers slam door 'shut' on Bank of Canada July rate cut, say economists Did the Bank of Canada cut rates too much and too fast? In the survey, businesses said they would only conduct layoffs if they experienced a sharp and prolonged decline in sales, but even then, layoffs are viewed 'as the last resort.' The majority of firms plan to keep their employment levels steady, while hiring intentions remain subdued as fewer firms than usual plan to increase their labour force. The unemployment rate in June declined for the first time since January to 6.9 per cent from its peak of seven per cent in May. Business investment remains focused on routine maintenance and maintaining existing capital, instead of boosting productive capacity. Fewer firms than last quarter expect tariffs to negatively impact their investment plans. The number of firms preparing for a recession has declined from 32 per cent to 28 per cent, but still remains above 2024 levels. Meanwhile, two-thirds of consumers expect the Canadian economy to fall into a recession this year. In April, Canada's GDP contracted by 0.1 per cent, after first-quarter growth came in above expectations due to a surge in exports ahead of tariff announcements. • Email: jgowling@
Yahoo
2 days ago
- Business
- Yahoo
Business confidence subdued amid tariffs but 'worst-case' less likely: BoC survey
A pair of reports from the Bank of Canada say tariff-related uncertainty continued to put a damper on business and consumer sentiment in the second quarter, but the worst-case trade scenarios previously anticipated seem less likely. The central bank's business outlook survey said 28 per cent of firms are now planning for a recession in Canada, down from 32 per cent last quarter but still up from 15 per cent over the previous two quarters. Sales outlooks remain pessimistic overall due to widespread concerns about the effects of a slowing economy, but the report says recent monthly surveys suggest some improvement in firms' outlooks, especially among exporters because few have been directly affected by current tariffs. Meanwhile, the Canadian survey of consumer expectations says spending intentions have weakened further because of persistent tariff threats. Consumers also continue to see the labour market as soft amid "elevated" fears of job loss. The reports come ahead of the Bank of Canada's next interest rate decision and monetary policy report set for July 30. This report by The Canadian Press was first published July 21, 2025. Sammy Hudes, The Canadian Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CTV News
2 days ago
- Business
- CTV News
Firms less worried by worst-case tariff scenarios, BoC says
Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers hold a press conference at the Bank of Canada in Ottawa on Wednesday, March 12, 2025. THE CANADIAN PRESS/Sean Kilpatrick
Yahoo
2 days ago
- Business
- Yahoo
TSX futures inch up on trade optimism
(Reuters) -Futures tracking Canada's benchmark index edged higher on Monday, rebounding from the previous session's losses, as investors were optimistic about the potential for trade deals between the U.S. and its key trading partners. Futures on the S&P/TSX index were up 0.2% at 1,629.3 points by 06:39 a.m. ET (1039 GMT). Canada's main stock index closed lower on Friday, dragged down by weakness in industrial stocks, as investors reacted to trade uncertainty following a report that President Donald Trump was eyeing new tariffs on European Union products. U.S. Commerce Secretary Howard Lutnick said on Sunday he was confident that Washington could secure a trade deal with the EU, but August 1 is a hard deadline for tariffs to kick in. However, traders awaited clarity on U.S.-EU trade talks and looked for additional trade deals ahead of Trump's August 1 tariff deadline. Meanwhile, domestic investors will assess the Bank of Canada's Business Outlook Survey, due later in the day, for business expectations amid tariff-related uncertainty. Among commodities, gold prices firmed and copper prices rose, while oil prices dipped slightly on Monday. In the U.S., several industrial and tech firms are set to report their earnings this week, with Alphabet and Tesla kicking off the results season for the "Magnificent Seven" stocks. FOR CANADIAN MARKETS NEWS, CLICK ON CODES: TSX market report [.TO] Canadian dollar and bonds report [CAD/] [CA/] Reuters global stocks poll for Canada Canadian markets directory Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CTV News
4 days ago
- Business
- CTV News
‘No chance' of interest rate cut in upcoming Bank of Canada decision: Economist
Watch Economist Colin Mang discusses the Bank of Canada's upcoming interest rate announcement and factors influencing the decision.
