The ongoing debate that has ensued as a result of recent gross domestic product (GDP) data that has indicated that Canada is currently in a ‘technical’ recession has bolstered talk on the federal election campaign trail, and has of course also led to some rather cleverly misleading statements from all of the party leaders.
First off, Canada is by definition in a recession, but you certainly will not hear that from Prime Minister Harper. Instead, you will see him focusing on other things, like a steady unemployment rate, blaming the country’s downturn on outside, global factors and pointing to economists’ predictions of third quarter growth…which, by the way, are all valid points.
A survey, conducted by Bloomberg of 18 economists, has predicted that Canada will return to GDP growth in the third quarter by two per cent.
But of course, depending on who you talk to, and which party leader you hear it from on the campaign trail, Canada’s future can have a very different outlook.
And, for Mr. Harper, the fact that he can only relay to Canadian voters what is being predicted by economists, will pose a challenge for his re-election.
He will have to rely on nothing more than a guess, and do his to best convince voters that that guess is an justifiable one, which, for all intents and purposes, certainly is – economists had predicted both the first and second quarter GDP contraction, thus making their abilities as a seer a bona fide opinion to rely on.
The same survey indicated that many economists feel the current recession is nothing more than a ‘watered-down recession,’ and that there ‘should be no worry that it will be the beginning of a long protracted period of negative economic growth.’
Several banks, including the Bank of Montreal, are also forecasting third quarter growth between 2.5 and three per cent. There were some economists who were less optimistic, citing the drop in oil prices and lower business investment as reasons for their pessimism.
Only time will tell.
There is no denying that Canada’s economy is heavily investing into natural resources, and when that sector takes a hit, so will the country’s economy.
Statistics Canada shows that between June 2014 and June 2015 that the mining, quarrying and oil and gas extraction industry fell 4.9 per cent.
Taking into consideration that a barrel of oil in June 2014 was over $100 and a year later is was half, the drop in the oil and gas industry is not a surprise.
In total between June 2014 and June 2015, there were eight industries that experienced a decline, but none more so than energy.
Fourteen industries saw growth, with arts, entertainment and recreation experiencing the highest percentage increase at 10.1, followed by finance and insurance at 6.5 per cent.
All industries combined, Canada had growth of .6 per cent between June 2014 and June 2015.
The current recession is not simply a result of the drop in oil prices, but also what has happened to the Chinese stock market.
Global companies lost around $4 trillion as a result of the crash. The bubble popped in June and by the beginning of July, the Shanghai stock market had lost 30 per cent of its value in a matter of three weeks.
People often like to blame politicians for not being about to ‘read the writing on the wall’ when it comes to these kinds of financial crisis, but being able to predict what is going to happen to global stock markets would be a skill everyone in the world would relish, as they would be very wealthy individuals who would also be immune to the threat of investment losses due to their prophet-like capabilities.
Aside from the United States and Europe, China is Canada’s main trade partner when it comes to exports. Thankfully, the U.S. is by far our main partner by a significant margin, which is usually why America’s economic success is so important to our own.
In recent history (since the 1980s), Canada has experienced four recessions if you include the current one.
The recession of 1982 under former prime minister Pierre Trudeau was quite severe, as the GDP dropped nearly seven per cent over an 18-month period.
The 1990 recession under former prime minister Brian Mulroney was a bit less severe, with a GDP loss of just over three per cent, but no laughing matter, nevertheless.
The recession of 2009 was a direct result of the global financial crisis that hit the world over and was the worst since the Great Depression of the 1930s.
Canada weathered the storm for nearly a year, and, for the most part was driven into a recession due the economic downturn in the U.S., which affected trade.
The GDP dropped 2.5 per cent in 2009, and less than two years later, Canada was the first G7 nation to have recouped its losses from the recession.
The recession we are seeing now equates to about a .1 per cent loss to our GDP, and we’ll just have to wait and see if it develops into anything greater.
If the majority of economists are correct, and we pull ourselves out of the slump in the next quarter and unemployment stays steady around 6.8 per cent, then we are fortunate. The most recent jobs reports says unemployment could rise to seven per cent, but we’ll have to wait and see what the third and fourth quarters will bring and if that trend will continue. But economic predictions sure don’t stop our prime minster from avoiding the subject altogether, or from his opponents from putting a magnifying glass on that .1 per cent.