Canada has entered what many consider to be a recession as the country deals with the consequences of a dive in oil and other commodity prices.
Statistics Canada on Tuesday reported a 0.5% decline in second-quarter GDP, following a downwardly revised 0.8% decline in the first quarter. A recession can be defined as consecutive negative quarters of growth, and Canada is the only of the Group of Seven industrialized countries in that territory. The U.S. grew 3.7% over the same time period, the Commerce Department reported last week.
While not everyone agrees Canada in recession — employment has not declined — it’s not a pretty picture.
“While not yet a recession, since employment hasn’t declined, Canada’s first half was about as weak as advertised, although the momentum registered in June is consistent with our view that the third quarter will provide a breather as the economy, at least for a quarter, returns to growth,” said Avery Shenfeld of CIBC World Markets.
Canada’s mining and oil sectors were to blame, with oil and gas extraction collapsing at an annual rate of 15.4%, and mining tumbling by 5.9%.
The weakness from energy spread throughout the economy, as utilities shrank by 7.5% and construction dropped by 4.9%.
Household consumption managed to rise, as Canada, like the U.S., continued to see strong demand for autos. That resulted in a fall in the savings rate, to 4% from 5.2% in the first quarter.
A quarter-point rate cut from the Bank of Canada could come at the Sept. 9 meeting, argued Bricklin Dwyer of BNP Paribas in a note to clients.
“The Bank of Canada is likely to read this report as disappointing. While the quarter’s growth was in line with their forecast, Q1 was weaker than they thought. This combined with the composition of growth and the recent move in oil prices, suggests that the risks to the outlook remain clearly skewed to the downside,” Dwyer said.
The Canadian dollar USDCAD, -0.1207% held its ground after the release of the report, but over 2015, the U.S. dollar is up about 13%.
http://www.marketwatch.com/story/canada-arguably-in-recession-after-2nd-straight-gdp-decline-2015-09-01
