Construction workers build a new house in Calgary, Alberta, April 7, 2015.TODD KOROL/Reuters
Canada's economy will rebound from the "technical" recession that took place earlier this year, a monthly survey shows.
Gross domestic product will expand 2 per cent in the third quarter, from a 0.8 per cent shrinkage in the second, according to median of 18 forecasts in a Bloomberg survey of economists. All but three respondents said the economy contracted in the first half, meeting the simple definition of a recession.
"It's a very watered down recession," said Tim Quinlan, an economist at Wells Securities LLC in Charlotte, North Carolina. "I don't worry about this being the beginning of a long protracted period of negative economic growth."
The economists in the Bloomberg survey, which was conducted Aug. 7 to Aug. 12, lowered their third– and second-quarter forecasts from 2.2 per cent and little changed the previous month. Statistics Canada is due to report the second-quarter figure Sept. 1. GDP shrank at an annualized 0.6 per cent pace in the January to March period.
The question of whether Canada is in a recession has filtered into Prime Minister Stephen Harper's bid for a fourth term in an Oct. 19 election, as he contrasts Canada's strong housing and jobs markets with struggles in other nations such as China and Greece.
In the fourth-quarter, economists predicted out will expand 2.1 per cent, down from 2.7 per cent in the July survey.
Lacklustre Recovery
Derek Holt, an economist in Toronto at Bank of Nova Scotia says the recovery will still be hampered by problems in the energy industry and with other exporters. "We do get a bit of a snap back in the second half of the year but it's going to be lackluster," Holt said.
That will probably mean the Bank of Canada keeps its benchmark lending rate at 0.5 per cent for about another year, according to the survey's median estimate. Governor Stephen Poloz cut rates in January and July as lower oil prices triggered a plunge in business investment.
On the campaign trail, Harper has said his plan to balance the budget and keep taxes low is keeping the job market going. The survey gave some support to that view, predicting the unemployment rate will remain at 6.8 per cent for the rest of the year, down from a 2009 peak of 8.7 per cent.
"The Canadian economy has great prospects going forward," Harper said Thursday in Regina, Saskatchewan.
New Democratic Party Leader Tom Mulcair disagrees, saying in televised remarks from Levis, Quebec on Aug. 12 that "Harper's decisions have led to the loss of 400,000 well paid manufacturing jobs in Canada" and that he would help by cutting small-business taxes.
Lower Crude
Neither candidate can control the price of crude oil, Canada's top export, which may determine the economy's fate and the outcome of the election from here. West Texas Intermediate for September delivery touched $41.35 on Friday, the lowest since March 2009.
Companies such as Canadian Natural Resources Ltd. and Suncor Energy Inc. have fired workers and canceled projects.
"We're going to get two quarters of negative growth back to back in Canada, so technically that would be a recession," Gregory Daco, senior economist in New York at Oxford Economics, said by telephone Friday. "If you're starting in the third quarter and looking into the fourth quarter and the next few quarters, the answer would be no," to the question of whether Canada will be in a recession.
The labor market's strength means there is no recession, the C.D. Howe Institute's Business Cycle Council said July 28.
Silvana Dimino at JPMorgan Chase & Co. and Scotiabank's Holt placed the odds of recession at 20 per cent. "I'm in the camp that doesn't believe that small quarterly contractions in GDP suffice" for a recession, Holt said.