September 19, 2022
2 min
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At a Glance: How persistent is high inflation?

A prudent financial forecast assumes long term contract pricing to move up, and short term prices to remain higher, for longer - as inflation expectations converge.

Wage inflation has hit a new high with a 5.4% increase year over year.  The markets expect costs to remain elevated at 4.5-5.5% over the next 12 months. While long term inflation expectations (5 years forward) have remained stable in the 2-3% range, the gap between short term and long term is narrowing.

Where are we now?

  • Hourly Earnings have increased 5.40% this year vs last  
  • Wages have steadily increased every quarter since Q2 ‘21
  • 1 Year forward (Fall 2023) inflation expectations remain elevated at 4.6%
  • 5 years forward (2027) inflation expectations have been relatively unchanged, currently at 2.8%

Where do we go from here?

  • Plan for elevated inflation of 4.5-5.5% over the next year
  • The ~2% gap between long term and short term inflation is expected to narrow  

What does this mean for Canadian business?

  • Assume inflation is persistent and here to stay longer than most expect
  • 4-5% wage inflation is expected to continue into 2023
  • Long term contracts pricing/cost assumptions should include 3%+ yearly increases



The opinions expressed are those of Henon Financial Technologies Inc. (“Henon”). The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Henon does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Henon disclaims any responsibility to update such information. Neither Henon or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein.

All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment or legal advice. Clients should seek professional advice for their unique situation. Neither Henon, Henon Capital Ltd., nor any of their affiliates or representatives is providing tax, investment or legal advice. Past performance does not guarantee future results. This material was prepared solely for informational purposes, does not constitute an offer or an invitation by or on behalf of Henon to any person to buy or sell any security and is no indication of trading intent in any fund or account managed by Henon. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Unless otherwise specified, all data is sourced from Henon.

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