Friday, May 22, 2009

Now it is the shortest recession

First, it was no recession in the US or Canada.
Next, it was a recession in the US but only a slowdown in Canada.
Then, it was a severe recession in the US but only a mild recession in Canada.
Now, it is a severe recession in the US but only a short, sharp recession in Canada.

"Canada’s Deepest Recession Since 1930s May Be Short ", Bloomberg, May 20.
Canada’s recession, likely its deepest since the Great Depression, may also be its shortest.
Let’s go back in time to November 19, 2008 (AFTER the stock market crashed).

Jay Bryan of the Montreal Gazette wrote a laughable article, “Why Canada looks likely to escape severe recession”. This guy writes a horrible column in the Gazette every few days, where he basically bashes the US economy, promotes the Canadian economy and then finds a clueless bank economist to back up his view.
Quoting National Bank economist, Yanick Desnoyers: "I cannot exclude the possibility" that Canada will have a mild recession, he said yesterday, but if so, it will be much less painful than the one south of the border. In terms of the average Canadian worker, for example, Desnoyers expects to see the unemployment rate rise by perhaps one percentage point before job conditions stabilize late in 2009.
Cannot exclude the possibility of a mild recession? In mid November, it was already obvious that we were in a severe recession, and he is hedging on even a mild recession. The Canadian economy has already tacked on almost 2% points to unemployment, shrunk by 5% to 7% for 2 quarters.

Let’s go to July 3, 2008 near the peak of oil and commodities.
"Canada growth rate seen halved but no recession" - Reuters
High commodity prices will help Canada avoid a recession this year but a U.S. slump will pull down economic growth to 1.4 percent, about half last year's rate and below official forecasts, Royal Bank of Canada said on Thursday.After an unexpected contraction in the first quarter of an annualized 0.3 percent, the economy will fare better in the remainder of the year due to support from consumer spending, business investment, an easing of financial market pressures and high prices for energy and other natural resources, the bank predicted in its revised forecasts."Domestic demand is holding up and will more than offset the significant drag from net exports this year," it said.

Yeah, things got much better in the remainder of the year! How did that "easing of financial market pressures and high prices for energy and other natural resources" prediction work out for you?

Let's go back further in time still: January 2008
"No recession in Canada, bank economists say"
Canada's economic growth will slow down this year, but will avoid a recession, top economists at Canada's biggest banks agreed Wednesday.
No need to add comments to this gem.
The five economists don't see a recession in the U.S. either, although some say it will be close.
It is insanity to listen to these same people with their same useless logic. Right now, they are correctly forecasting that the worst quarter of Canadian GDP was in Q1 (for the time being anyway). Even IF we do have a positive quarter, and I'm not convinced that we do, this does not mean that the recession is over! In Q2 of 2008, the US economy had a solid showing (2.8%) before tanking in Q4 (-6.3%). Did the US recession end in Q2 2008?

If you notice the common element in their forecasts: the bank economists always assume that what is up will stay up (commodity prices in early 2008/domestic demand) and when something drops (as everything did in Q4 2008/Q1 2009), things will go back to normal later in the year. I think to these people, the whole recession was just a normal cyclical thing and once it is over, everything will hunky dory again.


Anonymous said...

All this is fine.. and i mostly agree with what you have to say - but what I see in the real estate market, at least locally here in Toronto, is not in sync with this "reality". A 5-7% drop - Should i call that a drop? More like a drop in a bucket on an average 500 K freehold. And now there are reports of the sales having spiked last month.

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