Bank of Canada Word Salad

The Bank of Canada (BOC) Survey of Consumer Expectations was released yesterday and right on queue we’ve been given a big bowl of word salad. Also right on queue is main stream media simply passing on the word salad and once again failing to provide a side dish of critical thinking.

We’ll try to do some of that here with what we found to be the two most comical points of the report.

BOC:The gap between perceptions of inflation and actual inflation is unusually wide.  This is likely because many consumers form their views based on their own shopping experience”.

Consider; Is it possible that consumers perceptions are as they are because for the first time in a generation more of their monthly income is going towards food, gasoline, and housing than ever before?  You know, the ‘must have’ non-discretionary stuff, with less going towards the purchase of all the crap we can do without and still manage to survive.  You know; travel, entertainment, recreation, new clothes, restaurants, pushing off new durable goods purchases that we can sooner do without (ie. automobiles, furniture, appliances, electronics etc.) ?

What is closer to reality; a consumers lived experience or what the egg-heads at the BOC see on a spreadsheet?

BOC: “The news coverage that people focus on may affect their perceptions of inflation. Consumers are more interested now in news about inflation than they were before the COVID‑19 pandemic. Interviews showed that respondents tend to focus on stories about how inflation continues to be higher than before the pandemic as opposed to stories on the easing of inflation”.

Consider; Is it possible that consumers are more interested in news now because, whether they know it or not, the M2 money supply was increased by 26% during the “world is ending panic?”    It doesn’t take a PhD in economics to understand that more money chasing the same (or fewer) amount of goods raises prices.  Or perhaps that’s the problem, having a PhD in economics in the first place.

Also consider, you heard it here first folks!  Consumer perceptions have been skewed by the media.  The 26% increase in the money supply during the COVID-19 panic has nothing to do with inflation, so much in fact, that the Bank of Canada has found it completely unnecessary to even bring up.  Let’s just ignore it and those dumb Canadian consumers won’t be able to connect the dots.

Read the BOC full report here