While the U.S. has been leading world economic growth since the end of the Great Recession, Canada seemed to be doing all right, too. No longer.
No cute “Woe, Canada” headline. This is serious business.
According to the federal agency Statistics Canada, the country’s real gross domestic product contracted 0.5 percent in the second quarter. In the first quarter, it fell 0.8 percent. U.S. GDP grew 3.7 percent in the second quarter.
Our northern neighbor is in a recession.
No wonder Vancouver office vacancies are at a 10-year high. Canada’s unemployment rate rose to 7 percent in August. This complicates Prime Minister Stephen Harper’s efforts to keep power in an Oct. 19 election. Harper had taken credit for his stewardship of the economy.
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The big problem is falling oil prices, which are especially tied to China’s troubles but also to weak demand in other markets. This downdraft is also affecting other Canadian resource sectors.
This is more than a spectator event for Washington state. Canada is our second-largest trade partner, worth $9.3 billion in merchandise exports in 2014. Through June of this year, exports had fallen 11 percent, according to data from WISERTrade.
Some Canadians appear sanguine about the downturn. The Bank of Canada expects growth to resume later this year. Jobs continue to be added and consumer spending has risen, while the housing markets are strong in Vancouver and Toronto. The situation caused one economist to pronounce this “Best. Recession. Ever.”
Maybe. But deflation is afoot in many parts of the world, including China. Because Canada’s downturn is so heavily caused by outside forces, a rebound may be slower in coming than many think. And don’t forget economist Robert Shiller’s 2012 prediction that Canada could face a slo-mo version of the U.S. housing crash.
Today’s Econ Haiku:
Go up or hold ’em?
It’s FOMC poker
Very high stakes game