The latest evaluation from the leading body on downturn assessments in Canada suggests it is premature to use the term recession to characterize the sluggish economic conditions. There has been a heated discussion on the matter within Parliament since Statistics Canada revealed a consecutive two-quarter economic shrinkage.
Traditionally recognized as the authority in determining a recession in Canada, the C.D. Howe Institute’s Business Cycle Council, dismisses the notion of defining a recession solely based on two quarters of GDP decline. The council, in a recent statement, cautioned against overinterpreting the recent data, emphasizing that the current economic weakness does not meet the criteria for a recession as defined by the council.
One of the council’s members, Steven Ambler, outlined the group’s three “Ps” criteria to identify a recession – pronounced, persistent, and pervasive economic decline. The council argues that the current economic weakness in Canada is not widespread or enduring enough to warrant the recession label, with the slight first-quarter decline likely to be revised in the future.
Unlike previous instances where C.D. Howe declared a recession, the recent GDP decline is not as severe, according to the council. To officially declare a recession, the council states that a substantial economic downturn for at least one quarter, coupled with weakness in other recent quarters and a broad-based decline across various sectors, would be necessary.
While the Conservatives have blamed the Liberal government for a potential recession, Prime Minister Mark Carney anticipates uneven growth as the government aims to diversify the economy away from reliance on the United States. Additionally, Statistics Canada reported a decrease in the country’s unemployment rate to 6.6% in May, marking the first significant employment growth since November, as outlined in the agency’s latest jobs report.