OTTAWA (Reuters) - Canada’s economic recession ended in the third quarter of 2009 and was not only shorter and milder than in other G7 countries but was also less severe than Canada’s previous two downturns, Statistics Canada said on Thursday.
A report by Phillip Cross, chief economic analyst at Statscan, said the flow of credit in Canada was not as dramatically disrupted as it was elsewhere and that large savings helped finance spending when the economy faltered.
“One reason for the relatively mild slump is that Canada was better positioned to weather the global recession than other large western economies, primarily due to savings as reflected in our national balance sheet,” Cross wrote.
Real gross domestic product fell by 3.3 percent from the third quarter of 2008 to the trough in the third quarter of 2009, Cross said. That compares with a decline of 3.7 percent in the United States in the 2008-09 period and bigger declines in Europe and Japan, he said.
Contractions in other Group of Seven industrialized nations lasted between four and six quarters compared with three in Canada, he said.
Scotia Capital economists Derek Holt and Karen Cordes said the report by Cross adds to growing pressure on Bank of Canada Governor Mark Carney to raise interest rates sooner rather than later.
“(This) provides further evidence that the Bank of Canada will likely start to hike rates relatively soon, especially since they remain at emergency rate levels,” they wrote in a note to clients, referring to the report.
The bank is widely expected to keep its key rate on hold at 0.25 percent next Tuesday, but markets are divided on whether the first hike will be on June 1 or July 20.
Canada’s economy grew 0.6 percent in January, the fifth straight month of growth. Analysts now expect it to expand by 5 percent in the first quarter at an annual rate, matching fourth-quarter growth.
In Canada’s 1981-82 downturn, the economy shrank by 4.9 percent over six quarters and in 1990-92 it shrank 3.4 percent over four quarters.
Cross said the rise in the unemployment rate was also milder in the latest recession in historical terms. Former central bank Governor David Dodge said on Wednesday that all the jobs lost during the recession had likely been regained by now, although the data on that will not be available for a few weeks.
Reporting by Louise Egan; editing by Peter Galloway