World Economy

Canada Economy Sputtering

Canada Economy SputteringCanada Economy Sputtering

Canada’s economy is on the ropes again, believed to be contracting in this second quarter of the year, though observers predict a fast, sharp rebound.

The severity of the current slump ranges—even observers who believe the economy is still growing don’t think it’s expanding by very much—and it’s not just because of the wildfires that ravaged Fort McMurray and hampered the oil sands, Yahoo reported.

Toronto-Dominion Bank believes the economy will shrink by a mild 0.2%, annualized, this quarter, while Bank of Montreal’s, or BMO, Nesbitt Burns forecasts a deeper contraction of 1% or more.

“The economic slump in Canada isn’t expected to last long, however,” said TD economist Dina Ignjatovic.

“While we caution that the stronger the housing market becomes, the higher the risk of a correction down the road, we still expect it to remain healthy this year, moderating gradually over the second half of the year, and continuing to support domestic growth,” she added in a recent report, also noting the recent drop in the Canadian dollar, which should buoy exports, along with a pickup in US demand.

“This, combined with the resumption of oil production and the onset of reconstruction efforts in Alberta, should lead to a sizable rebound in economic activity in the second half of the year.”

BMO chief economist Douglas Porter said, the economy may be contracting by 1% in this month alone, given the hit to the oil sands.

Canada’s gross domestic product is likely to shrink at an annual pace of 1% or more in the second quarter, even if the economy perks up in June, he said, as BMO cut its forecast from its previous projection of a flat reading.

“Assuming production can recover in June, and along with rebuilding efforts and some already-planned fiscal measures, this sets up a strong rebound in Q3 of around 4% annualized,” said Porter, who expects annual economic growth of 1.6%.

Emanuella Enenajor, the North America economist at Bank of America Merrill Lynch, expects Canada’s economy to expand in the second quarter, but at an annual pace of just 0.2%.

For the year, she expects 1.6% at this point.