Search

The Canadian economy has been expanding strongly so far this year and is now operating fairly close to its full production capacity. Consumer price inflation has risen above the 2 per cent target and is expected to rise further before year-end because of high oil prices and a number of other relative price movements.

Results from the summer Business Outlook Survey suggest that business sentiment is strongly negative in all regions and sectors due to impacts from the COVID 19 pandemic and the drop in oil prices. Firms reported that weak demand is reducing both capacity pressures and expectations for price growth.

We provide empirical evidence on the impact of oil supply shocks on global aggregates. To do this, we first extract structural oil supply shocks from a standard oil-price determination model found in the literature.

Results from the Business Outlook Survey and the Business Leaders’ Pulse indicate that firms’ sentiment has deteriorated. Domestic sales outlooks have weakened amid heightened geopolitical uncertainty and elevated costs related to fuel, while export outlooks have improved because of stronger demand for commodities. Investment intentions remain solid, but fewer firms plan to add staff. More firms now expect their input and selling prices to rise, reflecting higher global oil prices. Firms’ inflation expectations are also higher than in recent quarters. Oil producers have revised their capital spending and production plans upward, citing expectations of sustained elevated oil prices.

This newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

There are three main issues I want to address publicly as I begin my term: the Bank's contribution to good economic performance; the Bank's contribution to promoting financial stability, both nationally and internationally; and the importance of open and frank dialogue with business, labour, and the general public.

While demographic change has been an ongoing process in Canada, labour market implications of an aging population will become more acute in coming years. This article discusses the anticipated slowing in the growth of trend labour input over the coming decades with the aging of the baby boomers, declining fertility rates, and the stabilization of the labour force attachment of women. As the pool of labour shrinks, employers and governments will be looking for ways to address barriers to continued labour force participation and firms will have a greater incentive to find ways of improving labour productivity.

Swings in inventory investment have traditionally played a major role in Canadian business cycles. However, advances in inventory-control techniques and the reduced uncertainty associated with lower inflation have enabled firms to manage their inventories much more tightly and effectively. This article examines recent developments in the management of non-farm business inventories in Canada at both the aggregate and the sectoral level and looks at implications for the role of inventories as a source of economic fluctuation.

We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.