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The Canadian economy has avoided a technical recession after economists updated the numbers that triggered alarm bells earlier this year. That’s #EconomistMath.
What happened: Gross domestic product (GDP) data shows the economy shrank by 1.1% last quarter from the previous year, falling above the 0.1% rise expected by economists and the Bank of Canada’s forecast of 0.8%, a steep drop from growth seen earlier this year.
- If you’ve been keeping up with economic news, you’ll know a second consecutive quarter of negative growth means the country has entered a “technical” recession.
- Still, Canada avoided a recession after GDP data from the previous quarter was revised (math is hard) up to a 1.4% gain from an initial report of a 0.2% decline.
Why it matters: The standard of living for Canadians (measured in economic terms as real GDP per capita) is tracking closely to early stages of historical recessions. As the population booms and unemployment rises, GDP per capita has been falling for over the last year.
- Per Bloomberg, outside of the pandemic years, household spending hasn’t been this weak since 2009. Or in other words, in the aftermath of the global financial crisis.
Bottom line: A weakening economy means more interest rate hikes are increasingly less likely. In anything, economists are starting to call for rate cuts in the first half of 2024.—SB