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2 Sep 2015
Canada slips into technical recession - Nomura
Fxstreet (Delhi) – Charles St-Arnaud, Research Analyst at Nomura, notes that the Canada has fallen into technical recession after its economy contracted by a 0.5% q-o-q ar in Q2, stronger than expected. This follows a downwardly revised fall of 0.8% q-o-q ar in Q1, marking the first two consecutive quarters of decline since 2009.
Key Quotes
“The main drags on growth were business investment and inventories, which contributed -1.5pp and -1.2pp to growth respectively on the quarter. These declines were partly reversed by an increase in consumer spending (contributing +1.3pp) and net exports (contributing +0.6pp).”
“Overall, the report confirms that Canada was in a technical recession (as defined by two consecutive quarters of decline in GDP) in the first half of 2015. As expected, most of the weakness was the result of a decline in business investment, but the data suggest that it may not only be owing to the oil sector. However, the fall in inventories suggests that some of the weakness could be temporary and indicates that this is unlikely to be repeated in Q3.”
“We continue to expect that the BoC will leave its policy rate unchanged at next week’s meeting. We believe the BoC’s focus remains on the exports side of the economy and the recent strength in non-energy exports is likely to be welcomed. As such, the release of the trade data later this week will provide further indications of the strength of exports.”
Key Quotes
“The main drags on growth were business investment and inventories, which contributed -1.5pp and -1.2pp to growth respectively on the quarter. These declines were partly reversed by an increase in consumer spending (contributing +1.3pp) and net exports (contributing +0.6pp).”
“Overall, the report confirms that Canada was in a technical recession (as defined by two consecutive quarters of decline in GDP) in the first half of 2015. As expected, most of the weakness was the result of a decline in business investment, but the data suggest that it may not only be owing to the oil sector. However, the fall in inventories suggests that some of the weakness could be temporary and indicates that this is unlikely to be repeated in Q3.”
“We continue to expect that the BoC will leave its policy rate unchanged at next week’s meeting. We believe the BoC’s focus remains on the exports side of the economy and the recent strength in non-energy exports is likely to be welcomed. As such, the release of the trade data later this week will provide further indications of the strength of exports.”