Call it a tale of two economies: the latest figures from Statistics Canada on Friday show economic growth in the country slowed but likely avoided a decline through the first half of the year, just as the United States reported its second consecutive quarter of contraction a day earlier.
The economies of the two North American neighbours have long been entwined; as of late, the two countries have been rocked with decades-high inflation and rising interest rates as central banks push to dampen surging prices.
Both Canada and the U.S. have seen manufacturing output slow, dragging down real gross domestic product this past spring, and housing markets on both sides of the border have significantly cooled in response to rising rates.
Economists say the main difference lies in the pace of the two economic recoveries from the COVID-19 pandemic. But as recession rumblings get louder south of the border, Canada’s economic fate might well be tied to the U.S.
4:08 Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession
Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession – Jul 6, 2022
Canada’s recovery — and decline — lags U.S.
Consumer spending makes up a significant portion of both the Canadian and the U.S. economies, notes Beata Caranci, chief economist of TD Bank.
But the consumer side is an even larger chunk of the U.S. economy, she tells Global News, which makes slowdowns in demand even more apparent in their GDP results.
The U.S. also began its reopening cycle from the COVID-19 pandemic much sooner, as the country had a faster COVID-19 vaccine rollout and loosened restrictions earlier.
Carrie Freestone, economist with Royal Bank of Canada, says the Canadian economic recovery is still progressing this summer as consumer demand for air travel and dining at restaurants, for instance, remains strong.
When this demand eases off, as Freestone expects will happen in due course as rising interest rates bite into household budgets, Canada’s consumer spending trends could fall back in line with its southern neighbour.
“I don’t necessarily think it’s a divergent path. I think it is just that we have a lot more of this pent-up service sector demand in Canada being unleashed,” she tells Global News.
“I think Canada’s definitely lagging the U.S.”
While the U.S. GDP has a heavier weight towards consumer spending, Canada’s economy is more exposed to the housing market, Caranci notes.
As a result, Canada could feel an outsized impact on its GDP as most economists predict a continued housing correction into the fall.
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Some global forces, meanwhile, could buoy the Canadian economy, notes Capital Economics’ Stephen Brown.
He notes that while commodities have seen “pretty widespread falls recently,” oil prices are still holding up, representing a boon for Canada’s energy sector.
“And that is more beneficial for the Canadian economy than the U.S.,” he says.
Would Canada follow the U.S. into a recession?
News of the U.S. recording two quarters in a row of negative growth was met with swift debate over whether the bar has been met for a technical recession, with most American officials downplaying such talk.
The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
1:07 Biden: U.S. ‘not in a recession’ according to Federal Reserve chairman, economists
Biden: U.S. ‘not in a recession’ according to Federal Reserve chairman, economists
If the U.S. ultimately does fall into a recession, Caranci says it will be hard for Canada to achieve its own “soft landing” because the same forces will be acting on the closely-tied economies.
Both countries are facing rampant inflation caused largely by global forces such as supply chain delays and the war in Ukraine, and are meeting these challenges with aggressive interest rate hikes.
Though Caranci notes there are “nuances” in how government policies are guiding their respective economies through a pending downturn, it would be hard to end up with a different result.
“You would have to come up with a logic on why an interest rate shock would impact Canadians less than the U.S. and an inflation shock would hit us less than the U.S. and I don’t think there’s a strong argument there,” she says.
RBC is forecasting mild recessions in both the U.S. and in Canada in the year to come. Freestone says the U.S. could fall into recession by the end of the year, with Canada’s contractions coming in the second or third quarter of 2023.
While she notes that Canada does not always follow the U.S. into recession — 2001 being a recent outlier in that regard — Freestone agrees with Caranci that Canada can’t necessarily escape the pressures stifling the U.S. economy.
“The forces that are playing out in the U.S. that would cause a recession to take place are also forces taking place in Canada and a lot of these forces are beyond our borders,” she says.
All of the economists who spoke to Global News said they expect the latest Canadian GDP report, which was slightly higher than the Bank of Canada’s forecast, won’t deter the central bank from raising interest rates at its next decision on Sept. 7. Each anticipates another outsized rate hike to take the bank’s policy rate to three per cent or higher.
Caranci says that even if Canada and the U.S. are on similar economic paths, the “depth” of any downturn might not be the same. She notes that the U.S. saw a historic leap in durable goods spending during its latest economic recovery, a trend Canada did not follow.
She argues that distinctions like this could put the U.S. at risk for a bigger correction than Canada.
“So just bear in mind that the trajectory may be the same, but the magnitude may differ.”
— with files from The Associated Press
1:45 The economy can handle further interest rate hikes, Bank of Canada governor says
The economy can handle further interest rate hikes, Bank of Canada governor says – Jun 9, 2022
HOUSTON (AP) — Brian White scored in the second half to rally the Vancouver Whitecaps to a 1-1 draw with the Houston Dynamo on Wednesday night.
Houston (12-9-8) took a 1-0 lead into halftime after Ezequiel Ponce scored on a penalty kick in the seventh minute of stoppage time. Ponce’s third goal this season came after Amine Bassi drew a foul on Whitecaps midfielder Pedro Vite following a video review. It was Ponce’s sixth career appearance, all starts.
Vancouver (13-8-7) scored the equalizer in the 73rd minute when White, who entered in the 60th, used assists from Fafá Picault and Ryan Gauld to find the net for the 13th time this season. Picault’s assist was his fifth, matching his career high for a single season. Gauld’s assist gives him a career-best 13 on the season.
Yohei Takaoka, who had clean sheets in his last three starts, finished with one save in goal for the Whitecaps.
Steve Clark saved three shots for the Dynamo, who remain one point behind Vancouver in the Western Conference standings.
Houston, which was coming off a 4-1 victory over Real Salt Lake, has allowed just 33 goals this season.
Vancouver — 6-2-2 in its last 10 matches overall — leads the all-time series 10-9-6.
The Whitecaps remain on the road to play the Los Angeles Galaxy on Saturday. The Dynamo travel to play Austin FC on Saturday.
FOXBOROUGH, Mass. (AP) — Tom Pearce and Nathan Saliba scored in the second half — the first goals of their careers — and CF Montreal rallied for a 2-2 draw with the New England Revolution on Wednesday night.
“In the second half, the guys came out a little more ambitious and above all, more connected,” Montreal head coach Laurent Courtois said. “It was a great second half of resilience and fighting spirit. Nathan and Sam were impressive.
“Impressive in covering the gaps and compensating for the teammates, and the individual defending – yes it’s true, it is a lot of weight on their shoulders, but that’s the job.”
New England (8-16-4) jumped out to a 1-0 lead in the 24th minute on Bobby Wood’s third goal of the season. Teenage defender Peyton Miller notched his first assist in his fourth career start and sixth appearance and Carles Gil picked up his ninth of the season. Peyton, at 16 years, 315 days old, is the eighth youngest player in league history to record his first assist.
The Revolution took a two-goal lead in the 35th minute and held it through halftime when 19-year-old Esmir Bajraktarevic took a pass from Gil and scored his third goal of the season and career in his first full season in the league. It was the 73rd regular-season assist in Gil’s career, tying him with Steve Ralston for the most in club history.
Montreal (7-12-10) pulled within a goal in the 54th minute when Pearce scored off a free kick after defender George Campbell drew a foul on New England’s Mark-Anthony Kaye. It was the first goal for Pearce in his third career start and fourth appearance.
“Playoffs are the goal. Maybe it wasn’t in the best form, but in the end, we are picking up a point,” Pearce said. “We came into this game confident, ready to play our own game. Everyone tries their best, whenever the players are called on, we are always ready, and we are always giving it our best.”
Montreal scored the equalizer in the 68th minute on the first career goal by Saliba, a 20-year-old midfielder. Saliba has made 34 starts and 48 appearances with Montreal in his two seasons in the league. Campbell snagged his second assist of the season and the third of his career.
“It’s an incredible feeling, it’s a goal I’ve been waiting for a long time. I’m extremely happy that I was able to score it and that it can help the team take this important point on the road,” Saliba said. “Pearce’s first goal gave us really good momentum and we kept up the pressure to go for a second goal. We got more solid defensively, and we came back ready after halftime, to push for these 3 points.”
Aljaz Ivacic finished with four saves in goal for the Revolution.
Jonathan Sirois stopped four shots for Montreal.
New England beat Montreal 5-0 on the road on Aug. 24.
New England leads the all-time series 16-13-4. Montreal improves to 5-8-2 on the road against the Revs.
The Revolution travel to take on Charlotte FC on Saturday. Montreal returns home to host the Chicago Fire on Saturday.
ARLINGTON, Texas (AP) — Adolis García hit a two-run home run in the sixth inning, Cody Bradford pitched seven strong innings after the worst start of his career, and the Texas Rangers beat the Toronto Blue Jays 2-0 on Wednesday night.
The win kept the defending World Series-champion Rangers alive in the AL West race, trailing first-place Houston by 10 games with 10 to play.
García launched an inside sinker over the left-field wall off Toronto starter Bowden Francis (8-5) after Wyatt Langford singled.
“He swings hard, he swings a lot,” Francis said of García. “I guess the velo was dropping during that time.”
Bradford (6-3) allowed five hits and no walks while striking out six.
The seven shutout innings are the most in a game during his two-year career. He was knocked out of his previous start after allowing career highs in hits (nine), runs (eight) and homers (three) in 3 2/3 innings in a 14-4 loss at Arizona.
“Throughout the week, you’ve got to try and digest what happened, see where I can make adjustments, whether it was just game plan went wrong or just poor execution, or a little bit of both,” Bradford said. “Then you flush it.”
Bradford was perfect through four innings before Alejandro Kirk opened the fifth with a smash back to the mound that caromed off Bradford’s left foot and rolled into right field for a single. It extended Kirk’s hitting streak to a career-high 12 games.
Spencer Horwitz’s double to left-center put runners on second and third with no outs before Bradford retired the next three batters.
Blue Jays manager John Schneider credited Bradford’s “deceptive fastball.”
“When you’re throwing 89, 92, you’ve got to have pretty good deception with that at this level,” Schneider said. “Kept us off balance.”
Kirby Yates pitched a perfect ninth inning for his 31st save in 32 opportunities.
Francis, who took no-hitters into the ninth inning in two of his previous four starts, allowed a double to Marcus Semien, the Rangers’ first hitter of the game. He gave up five hits and one walk in six innings.
Francis has a 1.96 ERA in nine starts with 54 strikeouts and seven walks since being moved back into the starting rotation in late July.
“I don’t even want to get complacent, on cruise control,” Francis said. “Just keep attacking.”
TRAINER’S ROOM
Blue Jays: SS Bo Bichette was a late scratch with a right middle finger contusion suffered during infield practice. Schneider said the team will get back x-rays on Thursday. Bichette was activated Tuesday following a calf injury and played for the first time in two months, going 2 for 5 with one RBI at the plate. … INF Will Wagner (left knee inflammation) will have the knee scoped on Thursday. Schneider said Wagner should be ready to start spring training. Wagner, son of former major leaguer Billy Wagner, was acquired from Houston at the trade deadline.
UP NEXT
Rangers rookie RHP Kumar Rocker (0-0, 2.25 ERA) will make his home debut against Blue Jays RHP Kevin Gausman (12-11, 4.02) in the series finale. Rocker allowed one run in four innings at Seattle last Thursday in his major league debut.
