Since this election campaign kicked off, Stephen Harper’s Conservative party has had to carefully balance its message on the economy—in one breath the Tories have pointed to strong growth as a reason for voters to re-elect them, while in the next they’ve warned that the economy is so fragile, only they can be trusted to protect it. Circumstances have dictated the party’s shifting strategy. A string of bad economic news about the first half of the year, culminating in two back-to-back quarters of negative growth in gross domestic product (GDP)—the standard yardstick for a technical recession—put the campaign into defensive mode.
On Wednesday, Finance Minister Joe Oliver, who has scarcely been seen on the national stage in recent weeks, emerged to argue that Canada’s economy was, and remains, most definitely sound. “We don’t believe that the economy was, in fact, in a recession,” he told the Associated Press.
So, fact-check time: Was Canada in a recession in the first half of the year, or not? By the aforementioned measure that has long defined the word recession—two negative quarters of GDP in a row—the answer is almost certainly yes. The Conservative government itself entrenched that definition in its Federal Balanced Budget Act, which came into force in June (the last month of the recession, incidentally): A recession, the act states, “means a period of at least two consecutive quarters of negative growth in real gross domestic product for Canada, as reported by Statistics Canada.” The caveat here is that StatsCan could still yet revise its earlier GDP figures upwards. The next release date for monthly GDP is Sept. 30.
However, it’s also true that the C.D. Howe Institute Business Cycle Council, the body that since the 1970s has assigned official dates to recessions, has not weighed in yet. It’s also clear that even if Canada was in recession, it was a relatively mild one. Employment continues to grow, as did consumer spending on homes and cars. As Bank of Montreal’s Douglas Porter noted earlier this month: “Best. Recession. Ever.”
Back to Oliver’s interview: “But I can tell you this, we don’t believe we’re in a recession at all now. The trade numbers are robust. Consumer confidence is good and we returned a budget surplus.”
Most private sector economists agree with Oliver that Canada is now expanding once again. However, the economy also continues to send out mixed signals. Exports have yet to rebound by anywhere close to the extent the Bank of Canada had hoped and expected, given the plunging loonie. Consumer confidence is also not holding up well—the Conference Board of Canada’s measure of consumer sentiment in August fell to its lowest level since 2013.
At the same time, economists have been downgrading their forecasts for Canada’s 2015 annual growth. As recently as late 2014, the OECD expected Canada to grow 2.6 per cent this year. It now expects growth of just 1.1 per cent. Economists at both TD Bank and Royal Bank are only slightly more enthusiastic, forecasting GDP growth of 1.2 per cent.
As the rest of the election campaign unfolds, expect the Conservative message on the economy to continue to swing as new data points—whether they signal further improvement or deeper problems—come to light.