Canada is officially in a recession that’s been caused by the COVID-19 pandemic, the C.D. Howe Institute’s Business Cycle Council declared Friday.
The council, which monitors recessions and recoveries in Canada, said the economy peaked in February, just before drastic measures to slow the spread of the coronavirus that causes COVID-19 were implemented across the country.
“Members agreed that by applying the council’s methodology to the preliminary data available, Canada entered a recession in the first quarter of 2020,” the council said in a statement.
There are no hard and fast rules for declaring a recession, although one rule of thumb used by economists is that an economy is probably in one if it has shrunk for two three-month periods in a row.
The council rejects the “two quarters” rule and instead defines a recession as a “pronounced, persistent and pervasive decline in aggregate economic activity” based largely on GDP and the job market.
The COVID-19 pandemic is still less than two months old in Canada, but the council said Friday that the slowdown is already so swift and deep that it’s safe to declare a recession already.
The loss of jobs in March 2020 completely obliterated the previous record, set in January 2009. (CBC)
“The council agreed the magnitude of the contraction makes it extremely unlikely that any future adjustments will overturn the conclusion of a major drop in economic activity in the first quarter,” the council said.
Declaring a recession is always controversial, since there is no unanimous view as to what qualifies as one. By the “two quarters of economic decline” definition, Canada had a brief, slight recession in late 2014 and early 2015, as the price of oil crashed.
In the council’s view, this is the first recession Canada has seen since the financial crisis that began in 2008. And the data suggests this one is on track to be quite a bit worse than that one.
While the decline in March was record-setting, economists expect the data for April will show an even bigger drop, with the measures taken to slow the spread of the coronavirus in place for the entire month.
The eight-person council, which normally meets once a year in December, decided to meet twice last month, once it became clear that something dramatic was happening to Canada’s economy.
Stephen Gordon, an economics professor at Université Laval and member of the council, says the current economic slowdown is a great example of how the “two quarters of contraction” definition of a recession is too dogmatic.
In a series of tweets on Friday, he noted that if the slowdown had started in April as opposed to March, the entire first quarter would have been excluded. And since a rebound in the summer is quite plausible, that would make the current recession only one-quarter long — deep though it may be.
“This episode would fail the two-quarter test, even though it’s obviously a recession,” he said.
The current episode is a good illustration why the the “2 quarters of declining GDP” definition of a recession is not a hard-and-fast rule. 1/
Statistics Canada reported Thursday that economic growth had stalled going into the crisis, with real gross domestic product essentially unchanged in February due to teacher strikes in Ontario and rail blockades across many parts of the country.
The official estimates of GDP for March and the first quarter of 2020 will be released on May 29.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
