Recessions and Bathing Suits Follow-up

Posted on June 2, 2008 by David Laidlaw 

It appears Canada’s economy is the mirror image of the US. Canada’s 1st quarter GDP fell by 0.3% and is expected to be down again in the 2nd quarter, meeting the standard definition of a recession. However, unemployment is near a 30-year low and personal income is soaring.

The slowed growth comes from slowing exports to the US and a weak automotive market. The high employment and personal income comes from soaring corporate profits due to high oil and gas prices.

This had led federal Finance Minister Jim Flaherty to reject ideas of a recession and state the economy is on solid footing. However, others believe signs due point to a recession because the current commodity prices are unsustainable.

Most consumers would say they prefer Canada’s economy because their income is soaring. In my opinion, the country most likely to pick up growth faster is the US. The US is not relying on one product (energy) to drive growth and, given that Canada relies so much on exports to the US, the US has to grow in order for Canada to grow.