Canada isn’t in a recession – at least not yet.
That’s the conclusion of the country’s unofficial arbiter of recessions, the C.D. Howe Institute’s Business Cycle Council, made up of 12 prominent economists.
After meeting last week, the council determined that “data did not provide evidence that Canada had entered an economic downturn,” according to a statement being released Tuesday by the C.D. Howe Institute, an independent think tank based in Toronto.
The council, made up of current and former bank chief economists as well as academics, said it based its assessment on a review of recent data on gross domestic product, employment and “sectoral activity.”
“The council noted weak GDP data in the first four months of 2015, primarily associated with low oil prices and falling investment in the energy and some other resource sectors,” according to the statement.
At the same time, it highlighted “resilience” in labour markets, including positive job growth and a steady employment rate.
Whether Canada has slipped into recession has become a hotly debated topic in recent weeks, particularly after the Bank of Canada released a new forecast on July 15, showing that the economy would contract in the first half of the year. The central bank said GDP will likely decline in both the first and second quarters, and growth for the full year will reach just 1.1 per cent.
The opposition NDP and Liberals seized on the prediction to attack the Conservative government’s handling of the economy in the lead-up to the next federal election.
Back-to-back quarters of contraction is the conventional litmus test of a recession.
But Prime Minister Stephen Harper, Finance Minister Joe Oliver and Bank of Canada Governor Stephen Poloz have suggested that it’s a lot more complicated.
Mr. Poloz said it will take months for experts to make that determination, and he has carefully avoided using the R-word.
“I’m not going to engage in the debate over what we actually call this,” he said recently. “No doubt, we have worked our way through a mild contraction.”
On July 21, Mr. Oliver insisted that Canada is not in a recession.
“This feels like a period of slower growth, but not a period of contraction,” he said.
The C.D. Howe Institute’s Business Cycle Council said it defines a recession as a “pronounced, pervasive and persistent decline in aggregate economic activity.”
Unlike the United States, Canada has not had an official arbiter of business cycles since Statistics Canada got out of the business after discontinuing its Composite Leading Indicator in 2012.
The U.S. National Bureau of Economic Research’s Business Cycle Dating Committee is considered the gold standard for determining recessions.
The C.D. Howe Institute has helped fill the void, with a Canadian version of the NBER’s recession analysis.
The council’s current members include C.D. Howe vice-president Finn Poschmann, Bank of Montreal chief economist Douglas Porter, RBC Global Asset Management chief economist Eric Lascelles, National Bank Financial chief economist Stéfane Marion, former Toronto-Dominion Bank chief economist Craig Alexander, former Statscan chief economic analyst Philip Cross and University of Toronto economist Angelo Melino.
The council said it plans to review its position this fall. Canada’s most recent recession began in October, 2008, and ended in May, 2009, according to the council.
OTTAWA — The Globe and Mail
Published Tuesday, Jul. 28, 2015 12:00AM EDT
Last updated Tuesday, Jul. 28, 2015 5:15AM EDT