In just a few days, Canadians will find out whether the economy was officially in recession in the first half of the year.
For many Canadians, it may be a moot point. Nearly six out of 10 already believe the economy is in retreat, polls show, NewsNow reported.
“While the official marker of a recession is two quarters of negative growth, recessions really start when people believe they do, which seems to have occurred already,” Forum Research president Lorne Bozinoff said after a July poll showed nearly 60% of Canadians were worried.
And, even if the latest data shows five months of negative growth ended in June, thanks to a nice rebound in exports to the US, Canada’s economy is still facing a period of sluggish growth.
“Slowth,” as economist Armine Yalnizyan at the Canadian Center for Policy Alternatives, recently dubbed it in a twitter essay.
The recession debate has been simmering since late July when Statistics Canada’s said GDP shrank in May for the fifth month in a row.
Plunging oil prices were slamming Canada’s energy industry, while temporary auto plant shutdowns and sluggish US consumer demand hurt Canadian manufacturing and exports.
But it wasn’t until the stock market sank on reports China’s red-hot economy is cooling off that Canada’s economy caught the attention of federal election campaign leaders this week.
June is expected to show a return to growth, when the data is released on Sept. 1 as a lower Canadian dollar finally gave non-energy exports a much–needed boost.
Still, the second quarter is likely to end on a down note, mired in April’s dismal performance. Thus, Canada will have met the “technical” definition of recession–two consecutive quarters of negative growth.
Real Recession?
Most economists say the two-quarter definition is too narrow to describe what’s happening.
A real recession needs to be widespread and pervasive and show up in worsening job losses, personal incomes and industrial investment, according to the C. D. Howe Institute’s Business Cycle Council. By those measures, Canada hasn’t met the test, the council says.
“We usually think of recessions as business drops off, you start losing jobs. The government should step in and do something about it,” said council member Stephen Gordon, an economics professor at the Universite Laval.
Outside the oil patch, many economic indicators are actually improving, economists noted.
“You can’t call it a Canadian recession. You can call it an Alberta recession,” said Bank of Montreal senior economist Robert Kavcic. “If you look at the labor markets in Ontario and British Columbia, and construction activity and home prices, it’s still very strong. There’s still 75% of the Canadian economy that’s not tied to the energy sector geographically.”
Economists now expect growth in the third quarter as US consumer spending picks up and a lower dollar makes our exports more attractive.
“If there was a recession in Canada, it’s in the rear view mirror,” Kavcic said.
