Canada's economy has contracted for two consecutive quarters, fuelling the "technical recession" debate, though the label doesn't fully reflect the current cycle, TD Economics said in a Thursday note.
The technical recession "label fails to capture the nature of the current cycle," wrote TD Senior Economist Rannella Billy-Ochieng.
Rapid population shifts have complicated the economic picture as earlier gains supported headline gross domestic product despite falling GDP per capita. At the same time, slower growth has since weighed on aggregate GDP as per-capita measures improve, said the bank. This has widened the gap between headline data and underlying conditions.
Canada has experienced rolling sectoral adjustments rather than a traditional recession, with weakness shifting from rate-sensitive sectors to population-driven industries and, more recently, US trade-exposed sectors, without developing into a broad-based downturn, according to TD's economist.
The outlook remains vulnerable to further trade tensions with the US, but the economy has absorbed successive shocks with resilience. The recovery is expected to be gradual, dependent on stronger investment, broader-based growth and support from the natural resource sector, added the bank.