By Paul Vieira


OTTAWA--Canadian businesses anticipate raising workers' wages over the next 12 months to attract and retain workers as labor shortages intensify, according to the latest quarterly business-outlook survey from the Bank of Canada published Monday, that likely increases pressure on the central bank to raise rates.

Labor shortages and supply-chain disruptions are among the factors that businesses say will hurt their ability to meet robust domestic and foreign demand, the survey indicated. These constraints will compel companies to raise their prices for goods and services over the next six months, businesses suggested.

The findings will weigh on Bank of Canada officials as they contemplate rate increases in the coming months to quell inflationary pressure. Its next policy-rate decision is Jan. 26, and some economists say it is time for the central bank to begin raising its benchmark rate next week. Bank of Canada Gov. Tiff Macklem said last month that central bank officials were uncomfortable with inflation in the country at a near two-decade high, at 4.7%, and they possess the will and tools to bring it down to its preferred 2% target.

The bulk of the survey was done prior to a sharp rise in Covid-19 cases in Canada due to transmission of the Omicron variant, forcing the country's two biggest provinces to impose lockdown measures. Still, the findings on inflation will likely influence the central bank's Jan. 26 policy decision.

The survey said a majority of companies, 80%, intend to raise wages at a faster rate in the next 12 months. "As labor shortages have intensified, the need to attract and retain workers has become the main driver of wage pressures," the survey said. Higher wages would leave workers with more spending power, thereby putting pressure on prices for scarce goods.

Companies said labor shortages are intensifying due to strong demand for workers, aging demographics, and employees' insistence for more flexible arrangements. "Firms expect that some of these factors may have a lasting impact, generating persistent tightness in labor markets."


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

01-17-22 1059ET