Its official: Canada was in a technical recession for the first half of 2015. If you haven’t heard it already (hard to believe as it has been repeated for months) the definition of a recession is two consecutive periods of economic contraction. Sounds painful, and for certain sectors it has been; the economy shrank by 0.8 per cent in the period from January to March and then another 0.5 per cent from the period from March to June.
The Numbers Don’t Lie
Statistics Canada released the Gross Domestic Product (GDP) numbers for April to June on Tuesday at 8:29 am, and the consequential debate has been fierce. Everyone – from economists to politicians to finance experts – has their own definition of what economic condition we were in for the first half of 2015. I want to jump in too and say the numbers don’t lie. That’s the plain and simple fact.
The Gravity of Oil
Economists will say this is not a broad-based contraction across many sectors, but only concentrated in the oil and gas industry. That’s fine, and analysis of where the drag is coming from is important. But it should be noted the impact of the decline in that sector has been so dramatic that it has reduced our GDP to negative for two quarters in a row. It has been big enough to put our country into a recession, as is defined by economists and our own Federal Government. Try telling the 900 Calgarians who lost their jobs in the oil and gas sector this week that there’s no recession. I think they would beg to differ.
Also read: Canadian Economic Forecasts Cut as Oil Drops>
It’s Not Even Close to 2008-2009 Conditions
Here’s the good news: we can call this a mild recession, not like the deep one experienced during the depths of the global financial crisis in 2008-2009. Back then, all sectors were impacted and the Canadian economy went through three quarters of contraction. At the worst of it in Q1 2009, the economy shrank by more than 8 per cent. Canadians stopped spending, stopped travelling and tightened up their financial situations in reaction to what was happening to financial markets around the globe. The financial meltdown was sharp and so was the decline in Canada’s GDP in reaction to it.
Leaving On a Positive Note
On the bright side, if resources are stripped out of the equation, 90 per cent of the economy actually grew by 0.6 per cent in Q2. The sharp declines in the oil and gas sector were offset by strong gains in consumer spending, the housing market and government spending. Even better – GDP numbers for June show economic growth of 0.6 per cent. Unfortunately, GDP is always a lagging indicator; we never know when we are in recession for sure, but we can take some inspiration knowing the number are improving month to month. In June, 17 of 20 industries reported higher output.
Start Calling It What It Is
In order for our nation to grow and prosper, and for Canadians to have faith in the information we’re getting from experts and government officials, we have to refer to the first quarters of 2015 as being in recession. It’s not enough to receive a tidy answer from a spokesperson. What’s needed is a clear, correct message that consumers can use to make sound decisions.