Earlier this week,
Statistics Canada (Stats Can) announced the second consecutive quarter drop in gross domestic product (GDP). The steady six month decline in GDP is the benchmark of a technical recession. However, many economists are calling it a
‘recession lite’ and noting that it is not as potent or widespread as the great recession of 2008.
In fact,
the Business Cycle Council, part of the C.D Howe Institute economic think tank, said in an official statement that “there's no evidence that Canada's economy has slipped into recession in any of the ways that people typically associate with the term.” This is because despite the drop in oil prices and a weakening dollar, Canada has experienced growth in a variety of sectors, which is counterintuitive to a country-wide recession. The Business Cycle Council defines a recession as: “A pronounced, pervasive and persistent decline in aggregate economic activity," not just a two quarter decline in GDP.
This more exact definition would then exclude Canada from a recession, as there has been growth in other areas of the economy, especially in this last quarter. According to data from Statistics Canada,
the economy added more than 100,000 jobs in the first four months of the year and consumer spending has been steady.
Like the employment numbers indicate, there has been business growth in select sectors. For instance, the manufacturing sector output grew by 0.4 percent in June. The manufacturing of nondurable goods such as chemicals, food, textiles and clothing grew nearly 1 percent in June “We are finally seeing the effects of the low Canadian dollar,”
said Brian DePratto, an economist at Toronto Dominion Bank. “Along with favourable interest rates and a strong outlook for the U.S. economy, the fundamentals are good to support manufacturing.”
The greatest growth was experienced in the arts and entertainment sector, spurred on in part by the FIFA Women’s Cup held in Vancouver and six other Canadian cities earlier this summer. The 6.4 percent increase in the arts and entertainment sector, noted by the Globe and Mail, will probably grow after the numbers from the Toronto Pan Am Games and Para Pan Am Games are added to the equation. It is expected to be the largest growth in that sector since May 2014.
Southern Ontario’s Rust Belt experienced moderate growth; not as impactful as that of arts and entertainment, but an indicator that the economy may be on an upswing. Factory sales rose 1.2 percent in June, but were 3.1 percent below the level they sat at a year earlier. However, it is the first time since 2007 that manufacturing sector outperformed the energy sector. According to
the Stats Can data, “the country sold $7.56 billion worth of motor vehicles and parts in July, compared to $7.33 billion in energy exports. Auto exports are up 11.1 percent compared to a year earlier, while energy exports are down 34.6 per cent.”
All this means Canadian goods are out performing Canadian oil, as companies like Lulu Lemon, and the start-up firm Smarter Alloys are enjoying profitable quarters and stable growth, despite the two quarter GDP losses.
While the energy sector stagnates, sustainable and green energy innovations are growing.
Secure Home Services (SHS), an Ontario-based business, offers customers reduced energy costs through reliable, eco-friendly equipment.
Secure Home Services offers a variety of equipment options, including air conditioners and heating units. The southern Ontario company has also experienced favourable growth in the last six months. “A lot of our customers want to save on growing energy bills,” said Michael Stedman of
Secure Home Services. “Being able to provide green products that reduce energy bills is very attractive right now.”
Due to the company’s energy saving products, Secure Home Service has been able to expand even in the midst of potential recession-like circumstances. “We recently expanded our operations to Alberta, because we want to offer energy savings to more Canadians,” Stedman pointed out.
The
‘recession lite’ may not be as large as those of the past, so it hasn’t spurned widespread concern like that of 2008 did. However, it is something that Canadians should be aware of. “I think it’s an indicator that the government needs to continue to look to other sectors to boost our economy,” Secure Home Services’ Michael Stedman added. “Our old model is clearly not working.”