WATCH: The health of Canada’s economy is under the microscope after a major American bank said we’re in a recession. Finance Minister Joe Oliver said the opposite. As Vassy Kapelos reports, there are signs of a slowdown —at the “greatest outdoor show on Earth” in Calgary.
Two major banks are suggesting Canada is heading for another recession just days after Statistics Canada noted the country’s economy shrank in the first quarter of 2015.
But even if Canada’s economy continues to stall, the worst effects of low oil prices may be “short-lived,” as provinces which benefit from low oil prices pick up the slack, according to a Scotiabank report, which cites data from previous times the price of oil had dropped.
“As Governor Poloz notes, the benefits of lower oil prices and an improving global economy eventually take over. Patience is required.”
The Scotiabank report continues: “The second half of the year is likely to get better than the first half.”
Statistics Canada reported Tuesday that Canada’s economy shrank 0.1 per cent in April, the fourth monthly decline in a row. Economists had been expecting a modest 0.1 per cent expansion.
Doug Porter, BMO’s Chief Economist, told Global News Tuesday that “forecasters continue to underestimate the downside pull of plunging activity in the oil and gas sector.”
Oil and gas activity dropped 2.6 per cent in April and is down 6.4 per cent for the year, Statistics Canada reported Tuesday.
As a result, two banks are saying Canada’s heading for a recession, just in time for the 2015 federal election in which the economy, and a balanced budget are expected to be key election issues for Stephen Harper’s Conservatives.
But Finance Minister Joe Oliver dismissed notions Canada was in a recession Thursday when speaking to reporters in Toronto, citing forecasters who predict solid growth for the final three quarter of the year.
A recession is typically defined as two consecutive quarters of negative economic growth but already two banks, the Bank of America and Nomura Bank, are suggesting Canada may already be in a recession.
Mike Moffatt, the chief economist with the Mowat Centre, said Canada’s economy needs to improve slightly more than usual – but “not outrageously so” to stave off a recession.
“I think it’s going to be close either way, it’s about a coin flip at this point,” he said.
Falling oil prices are pushing the country’s economy towards recession and not surprisingly will determine whether Canada enters a recession for the second time in a decade.
And he wasn’t confident a recession would be short-lived.
“There are a lot of unknowns right now and I wouldn’t be confident in saying that any recession would necessarily be short-lived,” he said.
Some analysts had suggested increased manufacturing and consumer spending as a result of lower oil prices could help Canada’s economy. But Moffatt points out that so far, they haven’t.
“That seems overly optimistic as well because prices at the pump actually aren’t all that low thanks to the low Canadian dollar, so I don’t think households are saving as much,” he said.
– With files from Jamie Sturgeon and The Canadian Press
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