Economists think the results of the Bank of Canada ‘s latest business outlook survey add to the case in favour of central bank policymakers cutting rates again when they meet next week.

The Business Outlook Survey for the third quarter said a rising number of companies are planning for a

recession — 33 per cent versus 28 per cent in the previous quarter — with continued worries about trade tensions with the United States.

The survey of 100 businesses conducted prior to Canada eliminating retaliatory

tariffs also said firms reported uncertainty was holding back investment planning and dampening hiring intentions.

Here’s what economists had to say about the survey results and what they mean for the Bank of Canada and the next

‘A bit cloudy’: National Bank of Canada

interest rate decision. “After the reported hiring surge earlier this month, the outlook for next week’s rate decision became a bit cloudy,” Taylor Schleich and Ethan Currie, economists at National Bank of Canada, said in a note.

Canada’s economy gained 60,000 jobs in September, recouping some of the nearly 140,000 positions lost in July and August, Statistics Canada said earlier this month.

The labour market appears to have muscled its way onto the Bank of Canada’s agenda after governor

Tiff Macklem last week described the jobs outlook as “soft.” “While markets now appear to be looking through that earlier jobs data, the upcoming decision is still unsettled,” the pair said.

Schleich and Currie, however, don’t think there is anything in the survey that should stop the Bank of Canada from cutting rates next week.

They say Tuesday’s inflation report due in the morning will be the final arbiter of policymakers’ next move.

Another cut would take rates to 2.25 per cent. But the economists said more cuts will be needed to stimulate the economy.

“While stimulative fiscal policy will be helpful (with more detail to come on Nov. 4), we don’t see its effects being felt quickly enough to lift the economy out of its current malaise,” they said.

‘Ample room to cut’: Royal Bank of Canada

“Soft demand and the inflation outlook from today’s survey results should leave the (Bank of Canada) ample room to cut rates again,” Claire Fan, a senior economist at Royal Bank of Canada, said in a note.

Companies surveyed said that sales demand was “weak” and that they didn’t expect sales growth to improve over the coming year as tariffs loom over the economy.

Further, companies’ inflation expectations appeared to have moderated slightly. Over the next year, businesses expect inflation of 2.9 per cent, falling from three per cent in the previous quarter and just below the top end of the Bank of Canada target range of one to three per cent. Over the next two years, businesses expect inflation to slow to 2.6 per cent. The Bank of Canada’s target for inflation is two per cent.

“Overall, the details aligned with our expectations — economic growth showed signs of stabilizing in Q3, but remained at weak levels that will limit upside inflation risks,” Fan said. “While this week’s Canadian (consumer price index) inflation data will be closely watched, available information supports another (Bank of Canada) rate cut next week.”

After that, Royal Bank expects the Bank of Canada will take into account stimulus provided in the Nov. 4 budget to direct future decisions.

‘Strong case’: Desjardins Group

Royce Mendes, managing director and head of macro strategy at Desjardins Securities, said it was important to remember that the survey was conducted prior to Canada removing retaliatory tariffs on U.S. imports.

“As a result, the responses might overstate the current economic weakness,” he said in a note.

He also said he thinks inflation expectations could be “overstated.”

Instead, Mendes believes that inflation expectations have cooled with retaliatory tariffs out of the picture and that “firms’ inflation expectations looked well anchored” given the “weak economic environment.”

“The timing of the Bank of Canada’s surveys makes it difficult to interpret the results,” he said. “That said, with inflation expectations, if anything, lower than what was reported in these surveys and the economy nowhere near full health, we see a strong case for further rate reductions.”

Desjardins said it expects two more rate cuts, which would lower the Bank of Canada’s policy rate to two per cent.

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