TD Disputes Canada's 'Technical Recession' Label: Population Growth Matters

Canada's economy has been labeled as experiencing a 'technical recession' due to two consecutive quarters of contraction. However, according to TD Economics, this label doesn't tell the full story. The research unit at Toronto-Dominion Bank notes that the data is being warped by fast-changing population growth.

In the past, when Canada's population was rising quickly, total output could remain steady even as output per person fell due to increased spending and employment. However, with population growth having cooled down, this trend has reversed. Now, a decline in headline GDP can be masked by improving per-person measures.

TD Economics also suggests that the recession is not an across-the-board downturn. Instead, industries have been experiencing weakness in rotation: first housing and big-ticket consumer spending, then population-driven demand sectors, and most recently those exposed to US trade. This 'rolling' slowdown has significant implications for company earnings, hiring, and loan performance.

The TD Economics report warns that any recovery will be gradual, with business investment and the natural resource sector playing a more significant role than a synchronized rebound across all sectors.