Supply Chain Issues Driving Inflation

Consumers’ expectations for inflation have risen and they believe supply chain issues are a key driver behind the rise, says the Bank of Canada’s ‘Canadian Survey of Consumer Expectations – Second Quarter of 2022.’ Short-term expectations are at record-high levels. Long-term inflation expectations increased significantly in the second quarter of 2022, returning to the levels they were at before the COVID‑19 pandemic. These expectations for higher inflation and rising interest rates are affecting consumer confidence. In response to such factors, Canadians plan to cut spending and are seeking out more affordable options when shopping. The report says that Canadians think supply chain issues (41.8 per cent), the COVID‑19 pandemic (31.2 per cent), and elevated government spending (22.9 per cent) are driving high inflation. These factors are also seen as more persistent than in recent quarters. More people now think it will take longer than two years to resolve supply issues. As well, some consumers believe the war in Ukraine is far from over and will lead to lasting higher prices for food and gas. Overall, Canadians are more uncertain now about how inflation will evolve but they think the likelihood of inflation remaining high for a long time has increased.