'Crystal clear sign' for Bank of Canada: What the economists say about GDP

financialpost.com:

The Canadian economy could already be in a “modest” recession, one economist says, after Statistics Canada released the latest GDP numbers for August and a preliminary forecast for September and the third quarter.

Gross domestic product in August was unchanged, Statistics Canada reported on Oct. 31, mirroring GDP in July and missing analyst estimates for a month-over-month uptick of 0.1 per cent.

The national data agency also released a preliminary forecast for September of flat GDP.

Based on the data so far, Stephen Brown, deputy chief North America economist at Capital Economics, estimated that third-quarter GDP contracted 0.1 per cent. That, coupled with the pullback in growth in the second quarter of 0.2 per cent would meet the technical definition for a recession — two consecutive quarters of contraction.

Other economists including Brown said it is still possible the economy could avoid a contraction in the third quarter.

“But with the Bank of Canada’s recent Business Outlook Survey and the October CFIB Business Barometer both now consistent with negative GDP growth, it seems more likely that the modest recession we are forecasting has now begun,” Brown said.

The latest data should give the Bank of Canada another reason to end its rate hiking campaign, say economists.

“This is yet one more crystal clear sign that the Bank of Canada should be done hiking,” said Benjamin Reitzes, economist at BMO Economics.

Here’s what economists believe the latest GDP numbers mean for the economy, the Bank of Canada and interest rates.

“The Canadian economy is already skirting a recession, with preliminary industry data for Q3 suggesting the possibility of a further slight contraction in activity to follow Q2’s surprise decline. For