Business
Canada officially entered a recession on Tuesday, but its economy may rebound soon. The Canadian economy shrank again in the second quarter, putting the country in recession for the first time since the financial crisis, with a plunge in oil prices spurring companies to chop business investment, writes Reuters. The confirmation on Tuesday of a modest recession will figure heavily into the election campaign as Canadians head to the polls Oct. 19 and poses a challenge to Conservative Prime Minister Stephen Harper, who is seeking a rare fourth consecutive term. Still, there was a silver lining as growth picked up for the first time in six months in June, underscoring expectations the recession will be short-lived.
Harper was quick to downplay what some supporters and economists have dismissed as a "technical" recession, pointing to the upbeat June figures during a campaign stop. "The Canadian economy is back on track," he said. But politicians from the opposition New Democrats and Liberals said the numbers were evidence Harper's economic policies were failing. Economists mostly agreed the 0.5 percent pickup in June put Canada on good footing for a better third quarter. "Despite the technical recession materializing, it does look like the Canadian economy is jumping back, is rebounding strongly in the third quarter," said Derek Burleton, deputy chief economist at Toronto-Dominion Bank.
The Canadian dollar initially rallied to a session high against the greenback following the data before giving up ground later in the day as oil prices fell. The last time Canada was in recession was in 2008-09, when the U.S. housing market meltdown triggered a global credit crisis. This time around, Canada has been primarily hit by the slump in crude prices, with weakness concentrated in energy-related sectors. Oil-exporting provinces like Alberta and Saskatchewan have been particularly hard-hit. Gross domestic product contracted at an annualized 0.5 percent rate in the second quarter, Statistics Canada said. That was better than forecast, though revisions showed the first quarter's contraction was steeper than first reported.
Canada, the world's fifth-largest oil producer, has been hit particularly hard by the halving of world oil prices from above $100 last year, reports AFP. In the second quarter, its mining, quarrying and oil and gas extraction sector posted a "notable decrease" for a second consecutive quarter, said the government statistical agency.
