Toronto (Financial Post/Bloomberg) – Canada probably fell into a recession this year because of damage from the drop in crude oil prices, according to Randall Bartlett, senior economist at Toronto-Dominion Bank, who now predicts the central bank will cut interest rates next week.
There are signs that output fell at a 1 percent annualized pace between January and March, more than Statistics Canada’s estimate of a 0.6 percent decline, and gross domestic product probably fell at a 0.6 percent second-quarter pace, he said.
“It is likely that the Canadian economy was in recession in the first half of the year,” Bartlett wrote in a research note Monday. “It is commonplace to define a recession as two consecutive quarters of negative real GDP growth,” he said. “The second half of the year is also likely to be weaker than previously expected, reducing annual real GDP growth to around 1.2 percent in 2015.”
The Bank of Canada will probably cut its 0.75 percent key interest rate for the second time this year at its July 15 meeting to revive growth, and not raise it until mid-2017, Bartlett said. That will probably keep Canada’s exchange rate below 80 U.S. cents through this year, he said.