By Jack Mintz, October 21, 2022
Canadians will find no solace in Statistics Canada’s Wednesday announcement of the September inflation numbers. Consumer prices rose 6.9 per cent in September from the previous year. Sure, that’s a notch below last month’s 7.0 per cent, but prices are still rising quickly, especially food at 10.3 per cent and shelter at 6.8 per cent. Together the two make up 45 per cent of the average household’s consumption.
As a result, expect the Bank of Canada to continue raising interest rates into next year. The excess demand for labour — almost one million jobs are unfilled — means inflation will linger. Even though firms will reduce job availability as demand for their output shrinks, many will still be looking for workers. Continuing labour shortages enable workers to bargain harder for higher wages to make up for the loss in the purchasing power of their money. So, expect GDP growth to stall while unemployment hardly ticks up. Sharply higher interest rates could eventually lead to a full-blown recession.