Economy shrinks again but Canada still not in ‘outright recession,’ economists say

A technical recession, but not an “outright recession.”

That is the verdict from economists Tuesday after Statistics reported that the Canadian economy shrank at an annual rate of 0.5 per cent in the second quarter, following a 0.8 per cent decline (revised from an earlier figure of 0.6 per cent) in the first three months of the year. A technical recession is defined as two consecutive quarters of negative growth.

While growth overall for the first half was weak, the second quarter ended with a strong handoff — GDP grew by 0.5 per cent in June, the strongest monthly reading since May 2014. At the same time, strength was seen in a number of areas of the economy, including the labour market, the services sector and consumer spending — all signs that Canada’s economy is healthier than the Q2 reading is suggesting, say economists.

“The lack of a net drop in employment over the same period meant that this was not yet an outright recession, and a solid gain in June GDP points to at least a one-quarter breather, with the economy likely to return to growth in Q3,” said Avery Shenfeld, chief economist at CIBC World Markets.

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