Two consecutive quarters of negative growth have officially placed Canada in a recession. This year’s first quarter saw Gross Domestic Product (GDP) fall by 0.8% and the second quarter decrease by 0.5%. The country’s last recession was during the 2008-2009 financial crisis. Drastically falling oil prices have been the biggest contributor to the country’s negative growth. Last year, oil was being traded at $107 a barrel; this year a barrel costs a mere $47. Given the rate at which oil prices have reduced and that Canada is an oil exporting country, the recession was not a surprise.
At this point, it is unclear what this recession will mean for Canada in the long term. Some point out that industrial production is the only sector that has seen growth decline at significant rates, and although the country is in a technical recession, it might not spread as far as some anticipate. Furthermore, economic performance in June did significantly better than the rest of the year and could signify that things will swing up in the third quarter. However, Canada’s hosting the 2015 FIFA Women’s World Cup contributed to the growth seen in June and it does not mean that negative growth is over. While the recession is unquestionable, the long term effect is still uncertain.
“Downside risks related to an extended period of low oil prices, slowing Chinese growth, and financial market volatility are intensifying,” pointed out Citi economist Dana Perterson. June’s positive growth may be temporary with negative growth continuing until the end of the year.
If you are concerned that Canada’s recession will create an economic downturn in the US, please Like & Share this post.
