National Bank Financial says the outlook for the Canadian economy is taking a turn for the better. But opinion is mixed on how soon rates will start rising again.

In a report follwing the release of the Bank of Canada’s quarterly business outlook survey, NBF said the balance of opinion regarding future sales growth jumped 12 points in the first quarter, to 20%. “That was the biggest quarterly increase in three years,” NBF said. “The news was also good on the jobs front, with the net percentage of respondents intending to add to their workforce rising to 39%, a new high,” it added.

“Past dollar appreciation notwithstanding, it appears that the Canadian economy remains on strong footing as it continues to operate at a relatively high rate of utilization,” NBF said. “Even if the Q1 business conditions survey remains consistent with an environment of rising short-term interest rates, the timing for such a move will most probably depend on upcoming international trade reports.”

NBF believes a rate hike at the May 25 meeting remains the most likely scenario.

BMO Nesbitt Burns Inc. is a bit more dovish, reading the survey as carrying a mixed message for the policy outlook. “Similar to last quarter, there are as many findings for hawks as there are for the doves,” it says.

“While the latest survey finds more spare capacity than expected, the Bank will also take note that businesses are markedly more optimistic and planning to hike prices more aggressively than previously. Normally, the easing in capacity would have officials content to stay on the sidelines, but that is largely offset by the growing optimism among firms and the budding inflation pressures,” BMO Nesbitt said. “On balance, there’s no smoking gun here for the Bank — not enough to prompt a near-term move on rates (say in May) — but there is still enough to get them to consider rate hikes by mid-year.”