If there is anything we have learned in the last year, it is that central banks are very bad at predicting inflation. This could be a cause for hope.
When Carolyn Rogers, the senior deputy governor of the Bank of Canada, warned on Wednesday – the same day statistics shocked almost everyone that Canada’s inflation data had jumped to unprecedented levels since 1983 – that there could be worse inflation, which may or may not be correct. After failing to forecast current inflation, the bank’s record speaks for itself.
“We know inflation keeps Canadians up at night. It keeps us up at night and we don’t rest easy until we get back to it,” Rogers said as part of a fireside chat hosted by the Globe and Mail. The hottest days of the year so far.
That’s why the Bank of Canada is raising rates “pretty aggressively,” he said.
View | Businesses, consumers struggle to cope with inflation:
The end of inflation?
Rogers and the Bank of Canada are not alone in looking at the gloomy future, where prices continue to soar (“The team’s transitory has dissolved,” Rogers sarcastically). But there are other voices, and it may just be time to look for signs of optimism, on the principle that it is always darkness before dawn.
Because inflation is out of control forever, and unless you are convinced that the price of everything will go on forever, inflation must eventually be temporary. Q: When is it?
New data showing the British train strike and Canadians are expecting inflation to continue These are worrying indicators of what the future may hold. But this week there are counter-signals that some of the major drivers of inflation – food, oil and supply-chain disruptions – may begin to heal themselves.
Meanwhile, while retail sales have yet to see a strong impact from the rise in borrowing costs imposed by the central bank rate hike, Canadian real estate has – Rogers noted – from the heat of its hypothetical fire.
To see the gloomy outlook first, the strike that has stalled transport across Britain is a potential warning of the kind of forces pushing wages, and therefore prices, too high.
Fight for lost spending power
“As long as our campaign is up and running,” Mick Lynch, general secretary of Britain’s Rail, Maritime and Transport Workers, said this week. With a three percent managerial pay cut amid inflation of more than nine percent, fears that the transport strike could launch a new “summer of discontent,” public sector unions, including the health sector, are struggling to regain lost spending power.
So far in Canada there are some signs of that kind of disruptive labor action, and governments may decide to try to appease the workers until it is far. Federally regulated dairy farmers, for example, have been given a mid-year price increase.
As Rogers reiterated on Wednesday, workers ‘and businesses’ conviction that inflation expectations, prices will continue to rise, is one of the things that central banks fear the most.
A recent report from the Canadian Conference Board provides some good and bad news on that front. Fresh June data shows Canada’s expectations are “up and out” a year ahead, but three years of expectations declined, showing that many Canadians may still be in the team’s transitory.
Major inflation has risen again in the latest statistical Canada data, and some of the key derivatives of the rising standards of prices for our fears of inflation remain.
Prices at the pumps reached new highs when last month’s data was collected, but gas-buyers know this month that prices, while still unpleasant, have fallen dramatically, meaning inflation may fall next month.
Adjusting to a statistical agency’s inventory basket to add new and used vehicle prices while increasing the weight of housing is expected to result in a one-time increase in future monthly data.
View | Where is inflation hit?
Not cheering gently
Some exciting data on prices came from AgriTel’s food commodity analysts this week, who pointed out that the global prices of cereals and oilseeds are beginning to fall, although the reason for the recession is that the fear of recession is not entirely cheerful. It shows how fast paced rate hikes are affecting.
When prices are relatively high, food manufacturers around the world, including Canada, are likely to plant a fence-to-fence-post to benefit, helping reduce prices if the weather cooperates.
Similarly, as US President Joe Biden promises to cut the gas tax, oil prices have started to fall. In spite of a Regression To drive less traffic from consumers in the US and Canada, business users risk rising interest rates and a declining economy – oil producers are still looking for efficiencies while looking for new sources.
View | Biden plans to freeze gas taxes to reduce prices at the pump:
Clarence Woodsma, author Commodity, land and local economic development And fellow professors at the University of Waterloo say that fuel consumption from shippers rises faster than GDP as growth picks up, but the reverse applies when the economy declines.
“Sometimes trucking statistics are referred to as a kind of canary in a coal mine,” Woodsma said. “If we’re going into a recession, businesses will stop issuing orders or they will adjust their inventory because they see what’s happening in the next quarter.”
That may be even more true in the wake of the recent supply chain problems North American businesses face. The shortage encouraged companies to fill their warehouses whenever possible. They must now try to disassemble that extra inventory, inadvertently helping to unlock the transport capacity required for other inputs that are still lacking.