Canada's Economic Freefall Might Be Over, But The Recession Is Far From Done

OTTAWA, ON: Canada’s economy has continued its downward slide, with the Macdonald-Laurier Institute’s leading economic indicator dropping by yet another 1.9 percent. This builds upon a harsh trend of decline that has been tracked in the previous two LEI updates. Comprising of 10 components, the LEI is a tool designed to predict Canada’s future economic growth and track changes within Canada’s business cycle. This latest update reflects data from May, demonstrating that while the trajectory of the freefall has improved slightly, Canada’s economy is still not out of the woods.

“While the worst of the impact of the shutdown may be behind us, the latest LEI update suggests that Canada’s economy will likely face persistent challenges for months to come,” explains LEI author and MLI Munk Senior Fellow Philip Cross. “While May’s numbers are a marginal improvement over the 2.3 percent decline measured in April, Canada remains in uncharted economic waters.” Since the start of measuring the economic impacts of lockdown measures, the LEI has dropped by a staggering 5.9 points. Even before the COVID-19 pandemic hit, Canada’s economy was only eking out meagre growth, suggesting that a quick recovery is unlikely to materialize. However, not all of the data was negative. The worst impacts of the lockdown on non-essential sectors of the economy appear to be past. The rate of declines in commodity prices, the stock market, and housing slowed. As well, joblessness rates increased more slowly in May. “We have survived an initial hard hit,” says Cross, but warns that “it will still be challenging to get our economy out of the recession rut, but it appears we are no longer in a full freefall.”