Bank of Canada Surveys Signal More Rate Relief Needed, Says Rosenberg Research

09:25 AM EDT, 10/21/2025 (MT Newswires) -- The Bank of Canada's Business Outlook Survey (BOS) for Q3 came in contractionary (-2.28) for an unprecedented eleventh consecutive quarter, said Rosenberg after its release on Monday.

The subindex assessing future sales expectations (-2.0 from +6.0 in Q2 and +13.0 in Q1) swung to negative terrain for the first time since Q2 2023. Export views notably weakened this quarter, to little surprise, given how trade discussions have hit a wall between the United States and Canada, noted Rosenberg Research.

Capital expenditure plans remained very soft, as the general high level of economic uncertainty continues unabated, and layoff intentions (13% in Q3 from 10% in Q2) are at the high end of the range of the past five years. If this report was missing anything, it was economic vitality, stated Rosenberg.

The one thing that the BoC needn't worry about is wage inflation, as the share of companies lamenting labor shortages -- even with tighter immigration curbs -- fell to a near-record low (13% in Q3 from 16% in Q2). Indeed, wage plans themselves have been cut in half, from the post-COVID-19 peak, to just over 3% -- nearly a five-year low.

In a measure of overall economic slack, only 3% of firms state that they are experiencing "significant" challenges in meeting any underlying demand.

The BOS measure of price inflation showed input cost pressures rising to a three-year high, but the prices-charged gauge is still in negative territory -- underlining the theme of pinched profit margins, added Rosenberg. The share of companies in the survey expecting inflation to remain in the 0%-3% band expanded to 72% in Q3 from 64% in Q2 -- at the peak of the inflation anxiety back in 2022, that share was a mere 12%.

In the companion Survey of Consumer Expectations (CSCE), it is much of the same. Household inflation views have been pared to a four-year low. The labor market indicator eroded to its weakest reading since Q1 2021. Respondents see nearly a one-in-five chance of a job loss over the next 12 months. Both income and spending views are at the low end of the range that Rosenberg has seen over the past three to four years.

All in, there is absolutely nothing here to stand in the way of the BoC engaging in another rate cut at next week's policy meeting, it added. The bigger question is why it ended up moving to the sidelines for so long.

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