Economists at RBC Royal Bank are advancing a different theory about the current state of the Canadian economy – they say it feels like a recession even though technically it isn’t one. You might call it a pseudo recession.
Their reading of the tea leaves shows the economy performing like it has in previous recessions. Personal output or GDP per capita is declining.
But the numbers mask that reality and immigration is the reason.
The economy, technically, is still growing as output slowly increases. But the population is growing even faster so, when you break it down to a per capita basis, we are going backwards or the economy is shrinking. And unemployment is growing, a pattern seen in recessionary times.
They say lowering interest rates will be a stimulant, but we should not expect that to fall back until the back half of next year. In other words, a year from now. However, lower rates – with another drop anticipated next week – will help those with mortgage renewals coming up or variable rate mortgages which could add to consumer spending power.
