Article by Benjamin Tal, Deputy Chief Economist, CIBC World Markets 

Accidents can happen to any economy. Temporary troubles in energy and autos hit exports hard during the second quarter, which was enough to push Canada’s Gross Domestic Product (the size of our economy with inflation factored in) into a decline—even though demand was healthy at home. This made the quarter look worse than it really was, and a rebound is therefore likely in the third quarter. Indeed, June’s monthly data showed a decent 0.2% gain as a signpost of an upward trend. Aside from January’s strong growth, Canada’s GDP has been essentially flat for five months. Flat economies don’t inevitably signal a recession—both Canada and the US have gone through many

The Bank of Canada is no longer as worried about inflation

Until the global economy is on a more solid track, the Bank of Canada is being very patient in raising rates. It hinted at rate hikes for July and September, neither of which materialized. Now the Bank is no longer as worried that low interest rates will trigger inflation, and therefore the need to withdraw monetary stimulus has diminished.