Business Cycle - Op Eds

The art of calling the start and finish of economic recessions might seem a minor one but it is critical to understanding how policy decisions can affect the economy.

Making such calls is normally a backwards-looking exercise, with business cycle analysts waiting for the accumulation of enough data before they feel comfortable issuing even a nuanced interpretation of whether the economy has reached key points in a cycle. This spring, however, the sheer depth and size of the economic losses stemming from the COVID-19 lockdowns left no room for doubt. The C.D. Howe Institute’s Business Cycle Council was able to declare by May 1 that Canada had entered a recession in the first quarter of 2020 and that the peak of the…

Economic downturns are never pleasant but this one stands out for all the wrong reasons.

The C.D. Howe Business Cycle Council announced on May 1 that the Canadian economy entered a recession in the first quarter of 2020. Monthly GDP peaked in February, then fell by 7.5 per cent in March and, according to Statistics Canada’s flash estimate released June 30, by a further 11.6 per cent in April. These declines wiped out all the growth in Canadian real GDP since August 2010 and represent the steepest, fastest slide in the 59 years for which we have data.

Though there are some positive signs in May’s economic data — a 1.8 percentage point increase in employment, increases in hours worked, exports and building permits…

Qu’est-ce que peut bien voir la Bourse pour regagner si rapidement le terrain perdu, alors que l’économie réelle se contracte comme jamais dans une profonde récession ?

Comme se plaisait à répéter mon ancien collègue de La Presse Alain Dubuc, « la Bourse, ce n’est pas l’économie ! ». Elle est plutôt le reflet d’opinions variées quant à l’évolution future des bénéfices des seules entreprises cotées en Bourse. Ici, le mot clé est futur.

La Bourse est un marché qui met un prix sur le futur, diablement difficile à prévoir, surtout au beau milieu d’une crise sans précédent. Ce prix est rajusté au fur et mesure que le marché digère de nouvelles informations, parfois contradictoires, d’où la…

For much of the last decade, Canadians have been told their debt levels were unsustainable and that their day of reckoning was fast approaching. Data recently released by the Office of the Superintendent of Bankruptcy (OSB) seem to indicate that day has arrived. According to the data, insolvencies by Canadian consumers were up 9.2 per cent in October 2018, compared to a year earlier.

To say the least, these results appear alarming. But in light of what we know about homeownership and net worth, we are not so sure. The data show that Canadians’ net worth has never been higher. Moreover, the data do not distinguish between the more harmful economic effects from households in negative net asset positions, or balance sheet…

Markets were not surprised by today’s Bank of Canada announcement to hike its overnight target rate by 25 basis points to 1.5 per cent. They had factored in a very high probability of an increase. And, consistent with a stated desire to improve its communications with both market participants and “the soccer dad,” it was a speech and a press conference that set the stage.

Governor Stephen Poloz’s speech on June 27 was an important factor in moving market expectations. By the end of the news conference that followed his speech, markets were confident of a hike. The theme of the speech was transparency and communications. By significantly shifting market expectations in the direction of a rate hike, the speech and news conference…