Canada's economy is still stuck in
recession, an international economic
organization declared recently in
a forecast that runs counter to the
Bank of Canada and most private-sector
The Organization for Economic Co-operation
and Development, or OECD, said Canada's
economy will shrink at an annualized
rate of 2 percent from July to September.
That's in sharp contrast to statements
from the central bank, which forecast
in July that the economy will grow
1.3 percent in the current quarter.
Since then, many private-sector economists
have estimated that annualized growth
could come in at an even stronger
The OECD report is an interim snapshot,
not the official semi-annual forecast
for which the high-profile agency
is known. It used gross domestic product,
or GDP, reports from the first half
of the year to make projections on
That's where the problem lies, one
Canadian economist said in an interview.
This recession has been very severe.
It set in quickly and, as a result,
certain economic indicators, such
as industrial production and jobs
figures, declined very suddenly, said
Michael Gregory, senior economist
at BMO Capital Markets. "If you
were to extrapolate from that, it
would look bad."
There is very strong economic data
not included in the latest OECD forecast.
For example, Chrysler Canada shut
down auto production in May but resumed
manufacturing in July. Chrysler's
minivan plant in Windsor has recently
ramped up production to keep up with
demand, spurred by the popular cash-for-clunkers
program in the U.S.
As well, existing home sales have
risen for six consecutive months.
"That's a sign that consumers
are buying big-ticket items and banks
are lending money to consumers to
buy big-ticket items. That's the stuff
of economic growth," Gregory
Statistics Canada said last week that
Canada's GDP edged up into positive
territory in June, and growth is expected
to strengthen through the rest of
the year. "In this case, the
methodology did (the OECD) a bit of
a disservice," Gregory said.
"You have to kick the tires,
smell the air, see what's going on."
Overall, the world economy is headed
for an earlier recovery than previously
forecast, although the pace of the
rebound will likely remain modest
for some time to come, the OECD said.
Presenting the report in Paris, the
OECD's top economist, Jorgen Elmeskov,
cited improving financial conditions,
a rebound in trade, and industries
that will use up their existing inventory
as factors pointing to faster economic
recovery in the OECD's 30 member countries.
However, the recovery remains fragile,
Elmeskov said. "Recovery looks
to be at hand for the OECD economy
at large, but it's important not to
get carried away," he said. "The
green shoots need careful nurturing
by policy, if they are to become strong,
The OECD said Canada's economy will
grow by 0.4 percent in the last three
months of the year, putting it ahead
of the U.K. and on par with Italy,
but well behind Germany, France and
the U.S. Only Japan's economy is expected
to continue shrinking in the final
quarter of this year, at a rate of