Canadian Economy Shrinks For First Time Since 2009; Recession Next?

Tyler Durden's picture

Don't look know but Canada just confirmed the first signal of a recession, after its GDP printed negative (on expectations of an unchanged number) for the first time since Q2 2009, due to a drop in exports and oil output, most of it blamed naturally on "transitory" factors. Odd how the US used the transitory line for months until it all turned out to be permanentory. What, however, is truly hilarious is the continued denial to look facts in the face as confirmed by the following three Canadian sellside analysts, who seem positively giddy that the number was major miss to expectations: their take home, just like as in the case of Canadian banks having some of the lowest TCE ratios in the world: "ignore it." Perhaps when next quarter Canadian GDP prints negative again, and the economy is officially in a recession, then the delightful comedy crew of what passes for "analysts" up north will have some words of caution finally. As for whether a recession confirmation in 3 months will be negative for the same banks which are downplaying both the GDP and its risk to their near world record leverage, we leave to the far more erudite, and far less shoot-from-the-hip Globe and Mail.


"Its worth noting that the economy did grow at a fairly respectable rate, plus 3 percent in the previous two quarters, and there were some temporary factors that slowed the economy in the second quarter. The supply chain disruptions in the auto industry, wildfires in Alberta and importantly, the economy appears to have ended the quarter on a fairly healthy note, June GDP up 0.2 percent. That suggests growth will rebound to about 2 percent in the third quarter."

"For the Bank of Canada, growth clearly came in well below its expectations back in July, when it thought the economy would grow 1.5 percent. On balance the report will likely weigh towards keeping the Bank of Canada on the sidelines and we believe they will not raise interest rates until next summer."

"There may have been a knee-jerk (currency) reaction, but I'm not seeing any long-lasting effect. Again, the report does not carry many implications for monetary policy, even though quarterly growth came in a little weaker than expected, June GDP came in a little better than expected, raising hopes that the economy bounced back in the third quarter."


"People should not pay too much attention to this number. It does not represent the real health of the Canadian economy. We all know the second-quarter was impacted in a very significant way by a supply disruptions in the auto sector and energy sector. Those two sectors really were significantly impacted. We know exports went down significantly during this quarter and you will see a nice bounce back in the third-quarter."

"Having said that, if we assume that the U.S. economy will remain relatively soft, exports will remain relatively soft and be under pressure. So although this picture in this quarter overstates the weakness of the Canadian economy and should not be taken at face value, given the temporary factors I mentioned -- this gives the new mix that we should expect over the next 6 to 12 months, which is a somewhat weaker export story given the fact that the U.S. economy will underperform."


"Going into the report, expectations had been flat GDP growth. So a little bit weaker than expected, unfortunately showing a decline, though it is a fairly minimal drop, a decline nonetheless. Weakness is largely coming from the net export component, and final domestic demand did manage to strengthen to 3.0 percent from a 1.8 percent gain in the first quarter. Nonetheless, it is indicating a marked weakening in the second quarter, certainly below the Bank of Canada's recent forecast suggesting growth at 1.5 percent, though subsequent comments by Bank of Canada Governor Carney did suggest the possibility we could see a small decline."

"Certainly this is reason to keep policy accommodative, holding steady, the overnight rate (target) at 1 percent. At this point, I think they'll view some of the weakness as being the result of transitory factors, and watch the data for indications of a bounceback in growth. And the monthly GDP numbers sort of indicate a start to that process, with growth ticking up to 0.2 in June after the 0.3 drop in May.

"The quarterly numbers (are) weaker than expected plus showing that decline, so as a result it could be a slight negative for the Canadian dollar. However it might be tempered a bit by the June GDP coming in stronger than expected."

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MichaelG's picture

"People should not pay too much attention to this number. It does not represent the real health of the Canadian economy," which is actually much much worse.

russki standart's picture

We must be getting closer and closer to the Labor day weekend when news from Canada is considered news. People should not pay too much attention to Canada, anyways. Who carez what happens in the great white north, anyways? Other than Poutine and  French Girls, what does Canada have to offer anyways other than Canadians (boring).

Mactheknife's picture

I don't know either but I do know that I'm going to short the shit out of this green opening.

wang's picture

coundown to another ZH feature in the Globe and Mail

sushi's picture

Another ZH feature in the G&M?

The G&M keeps running the last ZH feature. They just change the release date. News re-use is cheap. Saves on labour costs in the face of recession.



bankrupt JPM buy silver's picture

Recession?  Ha!  ZIRP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

eisley79's picture


both of those are from quebec, so why dont you stick to there.

At the end of the day 51% of Canada's economy is selling stuff to the US.  When the US finishes obliterating itself, they will take us down with them as well.  There is no alternative.  But, we will forever be locked at the hips, we provide all the natural resources, they provide all the military...

russki standart's picture

I like Quebec, I have spend a few nights on Ste.Catharine checking out the local clubs and making temporary new friends.  The people are really nice when you pay with USD.

Unfortunately, I have to agree that US will ultimately drag Canada down. Too bad.

unerman's picture

Lol, we don't like USD here. Good one!

russki standart's picture

I beg to differ. When I offered to pay with USD, she said Oui Oui, I now have moneee for florida. 

B-rock's picture

Don't judge the country based on a gracious host.  We know the US$ is a piece of shit.

Gully Foyle's picture

Production commenced on November 17, 1997 and Hibernia has proven to be the most prolific oil well in Canada, with initial production rates in excess of 50,000 barrels of oil equivalent per day from a single well. A dedicated fleet of shuttle tankers continuously operates between the platform and an onshore transshipment facility at Whiffen Head, adjacent to an oil refinery at Come By Chance.

The development of Hibernia involves a considerable amount of drilling services. As of January 1, 2007, over 50 development wells have been successfully drilled from the platform, including several world record "extended reach drilling" wells.

Terra Nova is an oil field development project 350 kilometres off the coast of Newfoundland. Discovered in 1984 by Petro-Canada, the field is the second largest off Canada's East Coast. Terra Nova is the first harsh environment development in North America to use a Floating Production Storage and Offloading (FPSO) vessel, the Terra Nova FPSO. Production from the field began in January 2002.

The oil is produced from the Late Jurassic-aged sandstone within the Jeanne d'Arc Formation. The reservoir was deposited as a large braided fluvial system. The discovery well was Terra Nova K-08 drilled in 1984 by Petro-Canada.

White Rose is an oil field development project 350 kilometres off the coast of Newfoundland. Husky Energy is the operator and 72.5 per cent interest holder in the White Rose oil fields.

Discovered in 1984, the White Rose offshore oil field is located in the Jeanne d'Arc Basin 350 km east of St. John's, Newfoundland and Labrador, Canada. The field consists of both oil and gas pools, including the South White Rose oil pool. The oil pool covers approximately 40 km2 and contains an estimated 440 million barrels of recoverable oil. White Rose is the second harsh environment development in North America to use a Floating Production Storage and Offloading (FPSO) vessel, the SeaRose FPSO. Production from the field began on November 12, 2005.

(Watch the first season of Ice Road Truckers. The hauling to gas and oil sites is very interesting.But I'm too lazy to search out information on those fields.)

BigInJapan's picture

Yes, and if I'm not mistaken, every well is in decline...

Now keep in mind that I am from Gander, and I do live in the other side of the world now, but I'm pretty sure "She's all in decline now, By's".


Now if somebody reeeeeallly wanted to look for something in Newfoundland... well the old Hopebrook gold mine on the south coast is still there... mothballed...

fonestar's picture

"Who carez what happens in the great white north, anyways? Other than Poutine and  French Girls, what does Canada have to offer anyways other than Canadians (boring)."


How about fishing, beef, natural gas, bitumen, copper, zinc, nickel, gold, silver, phosphate, iron-ore, highest grade diamonds on Earth, fur, grain, water, raw timber.... did I miss a few hundred others?

Read much?

russki standart's picture

Tsk, tsk Fonestar, you have no sense of humor. Canada is a good country to live in, and I have in vested in countless gold mines, junior oil and gas plays, base metal mines, I even shorted  SinoForest.  You assume boring is bad... would you rather live in the middle east, where life is always interesting?

fonestar's picture

I guess there's worse ways to be than boring.

gerryscat's picture

russki standart, your an idiot, or at least have a bad sense of humor.

SheepDog-One's picture

Right, nevermind these numbers, we've got the Bernank doing the 'QE carrot on a stick' for the last 8 months, which will never actually be delivered.

Gully Foyle's picture

Goddamnit! If the fucking ice roads lasted longer the Canuck economy would be growing.

Did you check out those oil tanks the Polar Bear and his buddy Rick hauled way out to fuckmeintheassmiddleofnowhere Canada?

Fuck of a lot of oil storage for a tiny little town.

russki standart's picture

Hey Gully Foyle, any ideas on how to sell the Canadian Real Estate market short? I plan to allocate at least .0125 percent of my lunch money to this trade. 

Financial Newbie's picture

Seeing as how the Canadian Mortgage and Housing Corporation (CMHC) is backstopping every sh*t mortgage here in Canada, and the CDN government (read: CDN taxpayer) is on the hook for all of the CMHC's debts, you may wish to pass on shorting the CDN real estate market and just short the whole damn country...



pitz's picture

HXD is a short on the TSX, not 'the entire economy'.  The TSX actually bears very little resemblance to the Canadian economy, and many firms (ie: the banks) are set up quite nicely for an economic downturn. 

Use HXD at your own peril (its motherfucking expensive too....)

Jaciems's picture

quite obvious now why you're called financial newbie...

Financial Newbie's picture

Sounds like a good plan... but any downsides/risks to holding an inverse product like HIF? I've been told to avoid the leveraged inverse version (HFD)...



rocker's picture

Buy the Dip.  LOL  With your money 

DefiantSurf's picture

I wonder if this will cause Shark Tank to be cancelled, I really like watching those crazy Canadian inventors

sabra1's picture

tonite it's back to back beachcombers, forest rangers, and rainbow country! closer to midnite, reruns of the pig and whistle!

Boilermaker's picture

A contracting ecomony from the largest importer of our <what's left> domestically made goods has to be a good thing.

SheepDog-One's picture

I believe they call this 'moving sideways' and the obvious solution here in New Bizarro World is to print more fake money. That helps.

falak pema's picture

How can Canada shrink with its four western states, paradise on earth, according to Count 'whats his name' who posts so superbly on ZH, and its TAr sands mountain of black wealth that the USA guzzles like an enfamished Leviathan...?

Something I'm missing, unless the Real estate ponzi, the prize plum of sterile FIRE economy, has now invaded the mindset of staid, run of the mill, Canadians. Gezzaks, are the Mounties now as dumb as their American counterparts?

Global Hunter's picture

The police up here seem to be on the same steroid and amphetamines programs that their American counterparts are on, not sure if they're quite as dumb as the Americans though.

GoinFawr's picture

@ falak

This year the idiot Canuckistanians gave a majority to the oxymoronic 'Progressive Conservatives', again.  Their members are all cut from the same cloth as the rest of the worlds' bought and paid for oligarchs, and have a long history of undermining Cdn. sovereignty, yet the duped electorate keep buying their constantly reneged promises. 

Also, Mark Carney, the Governor of their Central Bank, is a 13 year GS vet...

Does that help paint the red on the maple leaf a bit?

undercover brother's picture

No worries, Bernanke will "fix" their economy too.

Everybodys All American's picture

Black swans getting ready to migrate south for the winter?

The Axe's picture

That sucks if  you also have to own a bunch of Chinese restaurants in Canada...since rough rice just hit 17 dollars from 10 earlier this year....shit now thats inflation..

pitz's picture

Yeah but how much 'rough rice' does a Chinese restaurant use relative to its sales?  A few cents worth of rice is nothing when you're selling it for $5 as fried rice.

Josh Randall's picture

Shrinkage like George Costanza just out of the pool

Johnny Lawrence's picture

We'd be negative too if it wasn't for all this stimulus/money-printing.  I'd rather have the Canadian economy than the American economy.  At least, Canada makes stuff.  Plus, they have a much healthier banking system, if I'm not mistaken.  Canada has survived this global economic crisis much better than the US and Europe.

Or maybe I'm wrong...I'm just an ignorant American.

russki standart's picture

Johnny Lawrence,  Canada makes nothing. The manufacturing sector is practically non-existent. The banking sector is very highly leveraged.  The main asset of canadian banks are real estate loans. Canadian real estate pricing is in the midst of the mother of all bubbles. The average home in Vancouver BC sells for $1,000,000 USD, and is out of the reach of more than 95% of the population. Canadians are borrowing against their homes and buying cars, boats, second homes etc. If  the value of the loans backing canadian real estate dropped by 5% or more, the banks would be in distress. Sound familiar?

pitz's picture

Nearly all of the at-risk loans at the Canadian banks are backed by the federal government through the CMHC.  So failure of the loans ultimately results not in the bank going bankrupt, but rather, in the emmission of a whole shit-ton of national debt.    At some point, this sucks tremendous amounts of investment capital out of the system, and causes interest rates to eventually reverse and begin a long cycle upwards. 

Certainly not going to be pretty going forward, but I wouldn't worry too much about the big chartered banks.