According to Canadian statistics, the economy shrank 0.2 percent in May, falling below already low expectations of zero growth, according to Business Insider. The economy continues to suffer due to low oil and commodity prices.
In response to the economic downfall, the Bank of Canada slashed interest rates last month in hopes of stimulating the economy, with further easing measures expected in the future. Central bank head Stephen Poloz is not talking about a recession, describing the situation as "complex." Some analysts believe Canada is officially in a recession after the latest economic news, and the economy has been contracting for six out of the past seven months.
Areas of Improvement
Experts do not expect relief anytime soon, especially in the area of commodities. As of now, the commodities slump is the heaviest burden on the economy, but the commodity sector also suffers from low demand around the globe. Manufacturing and mining are underperforming as well, but Canada's dependence on high oil prices is a primary weakness, with major oil companies cutting back jobs in response to decreased oil prices. The unemployment rate in Alberta, which is Canada's largest oil-based region, climbed from 5.5 percent to 5.8 percent in May.
On the plus side, Canadian homeowners are spending more, and the construction sector remains in good standing. In addition, home prices are 42 percent higher than the 2008 crash, but economists expect a slow downfall rather than the immediate housing crash seen in the United States. Another issue is household debt, which may result in a spending slowdown as the housing sector slumps.
With Prime Minister Stephen Harper's conservative government facing elections in October, the New Democratic Party and the Liberal Party are gearing up by attacking incumbent officials over their handling of the economy. Harper and his fellow conservatives have held power since 2006, with a positive economic track record to tout until recently. Harper and his party have campaigned on a strong economic platform and have been consistent in using conservative principles to foster economic stability.
Finance Minister Joe Oliver maintains that the government will not incur a deficit because of the downturn, but the opposition remains skeptical, notes The Star. Oliver further explained that Canada's problems are also attributed to other events outside of Canada's control, such as China's slowdown in growth and the debt crisis in Europe. For now at least, Oliver maintains that the solutions to Canada's problems going forward will be tax cuts and a balanced budget, but the conservatives will have to be more innovative in getting the economy up to par, if they wish to survive fall elections.