The recently announced 100-basis-point rate hike from the Bank of Canada is aimed at quelling 40-year-high inflation and soaring prices that profoundly affect Canadian consumers and manufacturers. A new Canadian Manufacturers & Exporters (CME) infographic shows the impact on manufacturers of the sustained high costs for critical raw materials, such as forestry products.
May’s raw materials price index was up 37.4% from a year ago and has risen by two-thirds since January 2020. Logs and forestry products alone have increased in price by 42.1%. Along with these escalating costs, manufacturers are also grappling with other significant challenges, including supply chain bottlenecks, labour and skill shortages, and heightened global uncertainty.
Combined, these challenges are weighing on margins, leaving manufacturers with no choice but to pass on some additional costs to consumers. This is one of the factors driving high consumer price inflation in Canada. Higher interest rates curb inflation by reducing demand for goods and services and slowing the economy down. But in tandem with the Bank of Canada’s actions, policymakers must do all they can to build a more productive economy with a greater capacity to deliver goods and services to Canadians.
Increasing the economy’s supply side is fundamental to growth and helps create a more inflation-resistant economy.
“Canadian manufacturers are feeling the pain from these rapidly increasing costs and are ready to do their part in the fight against inflation. But this will take concrete steps from governments to help the industry get the workers it needs, improve the environment for business investment, and accelerate spending on critical infrastructure, said Dennis Darby, CME President and CEO. “We want to strengthen our sector and see it grow so it can continue to drive our economy, improve prosperity, and build long-term resilience against future shocks.”