Canada was not in a recession in the first half of 2015, right-leaning think tank finds

It was a label that caused a major headache for former prime minister Stephen Harper on the 2015 election trail as he sought to retain his seat for a fourth consecutive term.

Harper dodged questions about whether Canada was in a recession after Statistics Canada said its real gross domestic product shrank during the first two quarters of 2015, and his finance minister, Joe Oliver, denied the label altogether. 

However, Harper and Oliver may feel vindicated after a study published by the right-leaning C.D. Howe Institute Tuesday said that the slump in oil prices that caused the economic contraction in the first half of that year was “not widespread enough to warrant a recessionary call.”

The study, which was authored by the C.D. Howe Institute’s senior policy analyst Jeremy Kronick, puts forth a new business cycle measurement, which it said it led to the revelations about Canada’s sagging economy in 2015.

Kronick said this new method was necessary to fill the “crucial data gap” left when StatsCan stopped producing a diffusion index, which measures economic indicators such as output, employment, prices, profit or other relevant variables over a certain time span, in 2012.

“When Statistics Canada stopped producing their diffusion index, it left a major gap for policymakers trying to accurately track booms, busts or ripples,” Kronick, said in a press release.

“This new tool will empower public decision-makers with accurate assessments of the economy so that they can make wise policy decisions.”

The study said its own diffusion index is a better yardstick of the effects of economic shocks, by removing transitory events — such as a strike or weather — from the equation.

“Only true cyclical changes across industries are captured by this new measure,” said the release.

However, the C.D. Howe Institute’s findings contradict the traditional definition of a recession, which is seen as two consecutive quarters of negative GDP growth. StatsCan indicted in Sept. 2015, that Canada’s real GDP contracted 0.5 per cent between April and June that year, as well as by 0.8. per cent in the three months prior.

In July of that year, TD Bank economist Randall Bartlett also labelled the country’s economic struggles as a “very, very mild” recession.