Recession, or No Recession?
What a cliff-hanger! 0.3% annualized growth for the 2Q, and no “official recession” (not yet, anyway). I win my own pool (with my 0.2% guess). I will devote my winnings to the CCPA. The other guesses are posted in the comments section of the original recession-watch blog post here:
http://www.progressive-economics.ca/2008/08/09/jimbos-official-recession-watch-lottery/
Couple of tidbits in today’s GDP numbers:
1. If it weren’t for that big downward adjustment to the 1Q numbers, we’d be in recession (since without it, 2Q GDP would be LOWER than the unadjusted 1Q number).
2. Similar adjusments to the 2Q number could easily push us into an official recession. Conspiracy theorists take note: no adjustments to the 2Q number will be published until AFTER the mid-October federal election.
3. Canada’s real GDP (by both the quarterly data and the monthly basic price data) was lower in June than 9 months earlier. It’s only an arithmetic fluke that has prevented this sustained (if gradual) downturn from converting into two consecutive quarterly declines.
In short, there is utterly nothing in these numbers to give any comfort whatsoever to Harper and Flaherty. Canada is mired in its worst downturn in 17 years, and we are LEADING the U.S. into the economic soup (rather than coasting on tax cuts and our so-called “fundamentals” to a recession-free nirvana).
I always thought it was more of an exchange rate and commodity prices story. The data from the states says that their exports have rallied due to their weak dollar. Meanwhile, commodity prices are driving up our dollar, weakening our exports. There are x many Atlantic Canadians moving back and forth between Ontario and Alberta, with things for others staying mostly the same. The real policy question is whether we should drop interest rates (and lower the dollar in the process) so that Alberta overheats and Ontario breaks even. Either that or we consider a different exchange rate regime. Either way, elections are just a way of ejecting recession-era governments, with almost no impact on policy. I don’t see monetary or fiscal policy changing dramatically after the next election.
Okay Jim, you win, I am starting to wonder if you secretly work for statcan. This conspiracy is way deeper than I thought! Maybe I should quite watching reruns of the x-files. lol.
The whole point of this exercise regardless of the outcome has achieved its goal. That is, raising the awareness that we are in many ways within the clutches of recession and the policies at the federal level, particularly the over valued dollar has lead us straight into this economic meltdown. There are other factors but the dollar has got to be the number one causality that messed us up and got us here and it was the interest rate setting policies by the BOC that helped perpetuate our decline. Something had to be done to break the commodity link to our dollar and a more interventionist rate policy would have gone far in breaking the linkage.
The evidence is coming out now that oil trading and other such speculation type transactions were central to the rise in the price of oil. Much of the investigation by the American SEC is revealing some quite staggering levels of ownership of oil by companies whose sole purpose is to speculate and trade on margins. It is these movements in oil that benefited some parts of Canada and destroyed the economic fabric of others.
I hate to pit the regions of Canada against each other as that is not something our confederation needs at this point, but Harper’s ties to the west could be at the root of why Ontario and Quebec manufacturing has its hardship. I still go back to the labour markets. For all the job growth in the west, the labour markets are paltry in size compared to Ontario and Quebec. Potentially if we had a leader that somehow actually had any support in Ontario or Quebec we might actually get some focus on these economies.
THere was much that could have been done and there still is.
However the policies to get us there will have to be a lot more innovative that what we have seen in the current fed regime.
So how we just send in our cash to the CCPA.
I have said it before and I will say it again: the regional dimensions of this slowdown-stagnation-recession are going to change federal politics and not in favor of the conservatives.
Even if the Cons wanted lower interest rates and were able to get the BOC to deliver it would not necessarily help the manufacturing sector. For that to happen commodity prices would have to decline at the same time as interest rates were falling so that there was unambiguous downward pressure on the CDN dollar.
But for commodity prices to decline in any stable medium term fashion, global demand would have to decrease thus restricting international demand for CDN manufacturing exports as well. This is the downward spiral.
Monetary policy is not going to be very useful, nor is supply side fiscal policy (tax cuts). Direct fiscal stimulus through public works and infrastructure is likely to be the only effective option and even there I have my doubts about how effective.
My point was that I am not convinced like many others out there that the rise in oil was based upon legitimate nuances of demand. It seemingly has a lot more to do with speculation. The US SEC and a few other financial investigators are turning up some real gems underneath some low laying brush, seemingly filled with snakes and a whole pile of parasites. Kind of funny how these are not symbiotic relationships. The parasites (speculators) have killed the heart of the economy, their manufacturing host.
It is definitely a huge question mark that remains a troubled area given the foundations of our faulty towers. Oil is the key, but given we are a net exporter we can go back round and round in our debate. Like why should we be suffering such high prices when we have so much in our own yard. Why should our standard of living take a beating when we arte gushing in the stuff.
Ironic that the number one thing that kills our economy, is that what we have so much of. We are one screwy nation led blindly to the beheading block again and again. When will we ever get a real political party to take on these notions. Or potentially when will we ever have a popular uprising of political logic that takes care of the country rather then sells it out.
Kind of hard when a majority of your companies are run by Americans.
But alas I digress.
Sorry for the spate of posts, but seemingly my career as a numbers man has come to an end. Amazing how 14 years can vapourize just like that. Astounding. This site should come with a warning- Posting to the PEF can be indirectly hazardous to your career health.
paul t