Canada officially falls into recession

What does that mean for client portfolios?

Statistics Canada reported Tuesday that the country’s gross domestic product contracted by an annualized rate of 0.5 per cent between April and June, driven by a continuing slump in the oil and gas sector.

The second-quarter contraction followed a revised 0.8 per cent decline in economic output between January and March, meeting the technical definition of a recession.

“And thank God we didn’t use a couple of months of weak data to go out and commit this country to three years of deficit spending and huge tax increases like the other guys would have done”.

Albertans would likely disagree, of course: the province has reportedly lost 35,000 oil patch jobs so far. So July and August’s monthly GDP figures could be impacted, although other sectors of the economy are picking up.

Canada is in a technical recession, but there is light at the end of the tunnel. Both are said to have world-beating banking systems.

But as CTV’s Chief Financial Commentator Pattie Lovett-Reid points out, most economists see the recent slowdown as a “mild” recession at worst, because so numerous larger financial indicators are still positive. “It’s simply too early to register a final verdict”.

Still, there was a silver lining as growth picked up for the first time in six months in June, underscoring expectations the recession will be short-lived.

Harper fired back at critics, pointing to optimistic growth numbers for the month of June. Consumer spending rose 2.3 percent in Q2 after rising only 0.5 percent in Q1. “The numbers suggest maybe growth around 2 pct in the third quarter”.

Will BoC cut rates again?

The second-quarter results met the Bank of Canada’s latest estimate but exceeded economist expectations, which were for a decline of 1.0%, according to Royal Bank of Canada.RY -2.72 % .

“We continue to expect that the BoC will leave its policy rate unchanged at next week’s meeting”. The only ongoing litigation now is U.S. Steel Canada’s attempt to restructure under court-supervised creditor protection.

“As I said at the time, I said that all of the individual expenses of all senators would be looked at and those who were not following the rules would be held accountable. If anything, the figures appear to be stronger than anticipated, and should be helpful to the currency and the Canadian markets”.

The downturn today is much more subdued.

But the data shows that business investment and commercial construction fell sharply in Canada, reflecting cutbacks by energy companies responding to lower oil prices. “The political leaders will spin this in the way they would like it to be presented”. There are reasons for concern, and not only in the energy sector. He saw last Monday as a buying opportunity and added to his Canadian exposure.