Bank of Canada business outlook survey: Business sentiment sinks

<ul><li>Sentiment fell every month in Q4, from 22% at the start of the quarter to 9% at the end</li><li>38% of firms expect a recession in the year ahead vs 33% in Q3</li><li>54% of firms expect inflation to remain above 3% for the next two years vs 53% in Q3</li><li>75% of firms think wage growth will be back to normal by 2025</li><li>Consumer survey inflation expectations for 5 years to 2.62% from 2.75%</li><li>Future sales 20% vs 14%</li><li>Indicators of future sales vs a year ago -10% vs 0% prior</li><li>Firms see slight improvement in labor availability</li></ul><p>Wage growth metrics are improving.</p><p>Inflation expectations from firms.</p><p>In the consumer survey, note that 5-year inflation expectations are below pre-covid levels.</p><p>The survey also showed that consumers are increasingly lowering spending because of inflation and interest rates.</p><p>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.</p>

This article was written by Adam Button at www.forexlive.com.