A second issue that we are always working to better understand relates to developments on the inflation front. The companies that participated in our Business Outlook Survey (BOS) during the second quarter told us that capacity pressures and labour shortages were intensifying. Yet, wages were rising less quickly than we would expect in an economy that is near capacity.
The latest data indicate that this is still the case: Our preferred measure of wage gains was up by just under 2 ½ per cent in the second quarter. That said, inflation data for July surprised us on the upside by coming in at 3 per cent.