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Has Canada Entered a Recession?

The technical definition of a recession is two consecutive quarters of negative real GDP growth. Canada narrowly avoided an official recession last quarter due to a revision of the second quarter annualized figure from negative 0.2 percent to plus 1.4 percent. However, Q3 of 2023 came in at an annualized negative 1.06 percent. If Q2 had remained negative, Canada would have entered a technical recession according to the classic definition. If Q4 also comes in as negative and there is no significant upward revision of the Q3 figure, then a recession will officially begin at the end of Q2. It is worth noting that two of the last four quarters have seen a loss in GDP, resulting in overall growth of about 0.5 percent in the last 12 months.

The possibility of an official recession is causing concern among many people. Politicians are particularly preoccupied with avoiding the “R” word as it allows them to manipulate data and maintain the illusion that everything is okay until it becomes official. However, Canada has underlying systemic issues that are being overlooked due to the obsession with recessions. It should also be noted that not all recessions are the same, and the way in which the economy recovers from a recession can significantly impact overall GDP per capita.

The author argues that prolonged periods of poor economic growth are more common than many Canadians believe, even without taking into account the impact of the pandemic. They believe that mild or more severe recessions followed by strong recoveries are preferable to prolonged periods of economic malaise, which they believe may be happening currently. They caution against dismissing indicators such as the yield curve and believe that the likelihood of a recession in 2024 is high.

The author also discusses the impact of global economic factors on Canada’s economy, expressing concern about the country’s economic state and urging Canadians to focus less on technical definitions of recession and more on finding ways to address the prolonged economic deterioration that they believe is occurring.

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