Canada's Economy Remains Under Pressure Amid Technical Recession and Geopolitical Threats

Russell Investments' BeiChen Lin predicts that Canada's economy will remain under pressure due to technical recession and external geopolitical threats, but not broken. Despite a volatile economic data in Canada, with growth numbers swinging between positive and negative, Lin believes the labour market is where the recession narrative will be decided.

He argues that if the unemployment rate holds at 6.6 per cent, the situation remains uncomfortable but manageable. However, if it climbs back above seven per cent, Lin expects market participants to start pricing in more serious recession concerns for Canada.

Russell Investments has lowered its US recession probability to 15 per cent, down from 20 per cent in April, while keeping Canada's recession probability at 45 per cent for the year ahead. The firm believes that the Bank of Canada may need to do more to ease recession risk and suggests that some versions of the Taylor Rule indicate that the BoC should already have rates lower than where they sit today.