Thursday, July 31, 2008

May GDP "unexpectedly" shrank (again)

The Canadian economy shrunk again in May (unexpectedly) after already shrinking for the months of December and much of Q1. The question asked back in February is finally being whispered around Canada.

The usual banter from those who didn't see this happening: It's not really a recession because GDP doesn't measure price changes, yada yada yada.

There is clearly some truth to this, in that there does not appear to be a recession happening (unlike in the US). Yet.

So far:
-Canada has avoided the housing bust
-The TSX is only down slightly
-Energy prices have risen sharply (hence the positive price change alluded to above)

What happens when:
-The housing bubble turns into a full fledged bust
-Energy prices drop precipitously
-The TSX goes down with it

Then can we call it a recession?

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