While the country waits for the Bank of Canada to officially weigh in on the state of the economy, one of the country’s largest banks is already assuaging fears that the country is in a recession.
“I maintain the view that recession talk remains off base. Small back-to-back contractions in quarterly GDP are a necessary but not sufficient condition for a recession call,” Derek Holt, vice-president for Scotia
Economics, writes in the bank’s latest economic report, entitled Canada Exits the Great Non-Recession
. “Contractions of larger magnitudes have typically defined past recessions, and have coincided with broad based weakness in a variety of indicators that we don’t see this time around.
“Employment gains, robust housing markets, and solid consumer spending are not typically hallmarks of recession.”
According to the report, which was co-authored by Frances Donald and Dov Zigler, June GDP data was stronger than expected and the economy is poised for growth in Q3.
“June’s monthly GDP print that put an end to five consecutive monthly declines in GDP, the economy is showing signs of exiting the second quarter on stronger footings in such fashion as to set up growth momentum into the third quarter,” Holt writes.
The bank is also forecasting a rebound for the oil industry as well as exports.
It’s positive news, especially following a Stats Canada report that the economy was in a recession for the first half of the year.
StatsCan says the economy contracted at an annual pace of 0.5% in the second quarter of the year which is slightly less than analyst estimates and also lower than the 0.8% decline in Q1.
Brokers, however, still may see another rate cut later this month.
Economist Paul-Andre Pinsonnault predicted in a conversation with the Financial Post last week that the Bank of Canada will cut the overnight rate to 0.25% at the next meeting.