So technically not a recession. June’s GDP numbers are in and it seems the Canadian economy eked out a meager 0.1% for the month of June and the second quarter. Interestingly, the first quarter results were revised downwards from negative 0.1 % to negative 0.2% which means that over the last two quarters GDP shrank by 0.1%. So technically not a recession but in real terms negative growth over the first eight months of this year. So much for the de-linking thesis
As readers of this blog know I have been a growth pessimists for the more than the last year and that has not changed. Like others, I think we are in a period of structural transition. While the latest American GDP numbers look good a couple of points are worth mentioning. First almost all the GDP growth in the US was a consequence of export growth with imports actually shrinking. This is not good for Canada. Second, there are real questions over whether or not the US economy can sustain such spectacular rates of export growth especially in the face of a contracting Japan, a recessionary UK and a Stagnating Europe: that leaves Chinese demand to do all the heavy lifting for global demand growth.
Canada will by and large follow the US trajectory only mitigated by the price of commodities. However, the price of commodities is only weakly linked to jobs and wage growth outside of certain sectors and certain regions meaning that technical growth will be experienced by most Canadians as a real recession.