Canada’s economy will rebound from the "technical" recession that took place earlier this year, a monthly survey shows.
Gross domestic product will expand 2% in the third quarter, from a 0.8% shrinkage in the second, according to median of 18 forecasts in a Bloomberg survey of economists. All but three respondents said the economy contracted in the first half, meeting the simple definition of a recession.
The economists in the Bloomberg survey, which was conducted between Aug. 7 and Aug. 12, lowered their third- and second-quarter forecasts from 2.2% and little changed the previous month. Statistics Canada is due to report the second-quarter figure Sept. 1. GDP shrank at an annualized 0.6% pace in the January to March period.
The question of whether Canada is in a recession has filtered into Conservative Leader Stephen Harper’s bid for a fourth term in an Oct. 19 election, as he contrasts Canada’s strong housing and jobs markets with struggles in other nations such as China and Greece.
That will probably mean the Bank of Canada keeps its benchmark lending rate at 0.5% for about another year, according to the survey’s median estimate. Governor Stephen Poloz cut rates in January and July as lower oil prices triggered a plunge in business investment.
On the campaign trail, Harper has said his plan to balance the budget and keep taxes low is keeping the job market going. The survey gave some support to that view, predicting the unemployment rate will remain at 6.8% for the rest of the year, down from a 2009 peak of 8.7%.
New Democratic Party Leader Tom Mulcair disagrees, saying in televised remarks from Levis, Que., on Aug. 12 that "Harper’s decisions have led to the loss of 400,000 well-paid manufacturing jobs in Canada" and that he would help by cutting small-business taxes.
Neither candidate can control the price of crude oil, Canada’s top export, which may determine the economy’s fate and the outcome of the election from here. West Texas Intermediate for September delivery touched $41.35 on Friday, the lowest since March 2009.
Companies such as Canadian Natural Resources Ltd. (T.CNQ) and Suncor Energy Inc. (T.SU) have fired workers and cancelled projects.
The labour market’s strength means there is no recession, the C.D. Howe Institute’s Business Cycle Council said July 28.
