The second release of Q1 GDP pushed growth to a very slight negative number (-0.1% annualized). Lots of skeptical commentary regarding an imminent recession call based on this number, from professional economists (BN Bloomberg). Here’s GDP:
FIgure 1: Expenditure side Canadian GDP, bn.Ch.2017$ SAAR (blue, log scale). Source: StatCan.
As in the case of the NBER’s BCDC, the Business Cycle Council (BCC) at the CD Howe Institute does not rely solely on GDP, in part because it’s subject to lagging and potentially large benchmark revisions.
Employment and monthly GDP are plotted in Figure 2.
Figure 2: Employment, in millions, s.a. (red, left log scale), value added side monthly GDP, bn.Ch.2017$Â SAAR (blue, left log scale). Source: StatCan.Â
It’s not clear that monthly GDP has peaked (it’ll revised as well), although employment does seem to have peaked. However, the Canadian population shrank slightly, so interpretation of this decline is complicated.
In assessing the US case, one would typically look to industrial production. There’s no index directly comparable to that compiled by the Fed; however, StatCan does compile value added by by sector (which sums to monthly GDP shown in Figure 2). I plot industry sector value added in Figure 3.
Figure 3: Value added in industry, bn.Ch.2017$ SAAR (blue, left log scale). Source: StatCan.
March industry value added is 2% below peak. Since the standard deviation of a m/m change (ex pandemic) is about 1%, this is not a terribly large decrease relative to peak.
Here’s a link to BCC’s toolkit of metrics for business cycle diagnostics. One measure Unfortunately, they don’t publish their data on an ongoing basis. One series of particular interest would be their (unpublished) diffusion index (see methodology here).
Addendum:
To highlight the difference between betting and economic definitions of recession, see the Polymarket outcome for the Canada recession bet, and how the punters can be surprised:
The odds for a recession call (either 2 quarters negative growth or CD Howe declaration) was only 19%. Somebody made some money.
In the case of Canada, there were two consecutive quarters of negative GDP growth in 2015; yet CD Howe’s BCC declined to declare a recession since the declines were concentrated in certain sectors.
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