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Canada’s economy won what’s likely a final verdict on the country’s 2015 downturn: It was bad, but it wasn’t a recession.
The C.D. Howe Institute’s nonpartisan Business Cycle Council, a group of economists acting as an arbiter of booms and busts, made a close decision Friday to affirm the damage was still too narrow to label a recession. The review was undertaken to account for Statistics Canada data revisions last month that showed the impact of the oil-price collapse that year was larger than previously estimated.
The council stuck to its initial assessment because the downturn — which included two consecutive quarterly contractions in output — wasn’t broad enough and the economy continued to add jobs.
“It was an extremely close vote in the end,” Jeremy Kronick, associate director for research at C.D. Howe, said by phone from Toronto. With the narrow contraction and positive employment, the group “found it hard to call this a recession.”
The R-word was widely bandied about during the 2015 election campaign to attack the economic record of then Prime Minister Stephen Harper, who went on to lose the vote to Justin Trudeau.
Negative Revisions
Members of the business cycle panel who saw a recession were swayed by the size of the negative revisions, Kronick said. Statistics Canada changed the contraction in the first quarter of 2015 to an annualized pace of 2.2 per cent from 0.8 per cent, and the second quarter to a 1.1 per cent decline from 0.3 per cent.
Back-to-back quarterly declines, a situation some analysts refer to as “technical recession,” are usually a good indicator of a true recession. But it turns out not this time, the C.D. Howe report finds.
“There’s no other point in the period that we look at since 1961 where you see declining GDP and positive employment,” Kronick said.
Employment rose in five of the first six months of 2015 as output fell, with an average gain of 17,600 positions.
Most of of the damage in 2015 was taken by oil producers in Alberta, while lower energy prices were a benefit to consumers and manufacturers in Ontario and Quebec, Canada’s two most populous provinces.
Bloomberg.com
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