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The recession is here

The economy in Canada is so strong that it appears we have entered a technical recession based on preliminary data provided by Statistics Canada this morning in its August 2023 update for gross domestic product by industry.

The agency indicated within the report an advanced estimate for real GDP for September and Q3 2023 that states that real GDP by industry was essentially unchanged in September, as was the third quarter of 2023. Three straight months of flat output, beginning in July, suggests a decline of 0.1% on an annualized basis, and follows a decrease of 0.2% in the second quarter.

Those subsequent declines point to a technical recession being entered into, based on two consecutive quarters of negative growth in real GDP. It also highlights that the Bank of Canada – who sets Canada’s interest rate policy – was substantially short on its estimate for 0.8% growth in the third quarter, an estimate that was released just days ago in its Monetary Policy Report.

You can read more on the matter here.

What’s going on?

• Moe Gives Trudeau Ultimatum: No Carbon Tax From Saskatchewan If Ottawa Doesn’t Extend Home Heating Oil Exemption To All Canadians (theDeepDive)

• US Consumer Confidence Drops to a Five-Month Low on Inflation (Bloomberg)

• All-In Podcast: The Four CEOs Are Hiring A CEO For Their Podcast (theDeepDive)

• BHP pushes ahead with giant fertilizer mine expansion in Canada (BNN)

• GOP Wants to Defund Free Tax Filing System to Allow the Government to Send Military Aid to Israel (theDeepDive)

• Euro zone inflation and growth fall as ECB hikes bite (Reuters)

• CTF Anticipates Canada’s Alcohol Excise Tax To Climb 4.7% In 2024 (theDeepDive)

• Conservatives Push for Carbon Tax Breaks on All Home Heating (theDeepDive)

• Biden’s ‘Junk Fee’ Crackdown Comes for Retirement Advice (WSJ)

• Did Liberals Just Admit They Only Serve Those Who Elect Them? (theDeepDive)

What’s the latest?

• Canada’s Recession: The Canadian economy may be in a technical recession, with Statistics Canada's preliminary estimate suggesting a 0.1% annualized contraction in Q3, following a flat growth in August and a contraction in Q2. Despite growth in eight out of 20 industries, factors such as high interest rates, a 3.8% inflation rate in September, and environmental conditions have led to stagnation.

• Eurozone Inflation: Recent data indicates that the euro zone is experiencing a rapid decline in inflation and a contraction in its economy. Inflation slowed to 2.9% in October, its lowest since July 2021, while the economy contracted by 0.1% in the third quarter, suggesting that the ECB may pause further rate hikes.

• US Labor Costs Rise: U.S. labor costs rose notably in the third quarter, with the Employment Cost Index (ECI) increasing 1.1%, slightly above the expected 1.0%, driven by strong wage growth of 1.2%. This uptick in compensation, coupled with the fastest economic growth in nearly two years, suggests that the Federal Reserve may maintain high interest rates. With wages growing 4.6% year-on-year and benefits increasing 4.1%, the data indicates persistent inflationary pressures.

• Immigrant Exit: A study by the Institute for Canadian Citizenship and the Conference Board of Canada reveals an increase in immigrants leaving Canada. The report shows that the annual rates of immigrants departing Canada hit 20-year highs of 1.1% in 2017 and 1.18% in 2019, compared to an average of 0.9% post-1982, leading to potential attrition of over 20% of an arrival cohort in 25 years.

• WeWork Struggling: WeWork announced on Tuesday its decision to withhold an interest payment of approximately $6.4 million on its 2025 senior notes, despite having sufficient funds, as it seeks to restructure its balance sheet amidst ongoing financial turmoil. The company has arranged for a temporary postponement of payments on some other notes and is in the process of finalizing a restructuring deal, possibly involving a bankruptcy filing.

Victoria's Secret Woke Rebrand Fail

The stock market and stuff

• Air Canada Says Travel Demand “Very Stable” As Airline Reports Net Income Surge In Q3 2023 (theDeepDive)

• Cameco Surges After Q3 2023 Financials Beat Estimates (theDeepDive)

• Tesla Erases $145 Billion in Valuation on Demand Woes (Bloomberg)

• First Quantum Craters 27% As Panama Puts Future Of Cobre Panama Mine To Referendum (theDeepDive)

• Canadian Tire buys back stake in financial services business from Scotiabank (BNN)

In the juniors

• American Lithium Reports 5.53 Million Tonnes Measured And Indicated Resource At Falchani (theDeepDive)

• ATHA Energy: Exploration In Saskatchewan’s Athabasca Basin (theDeepDive)

• VERSES Selects First Partner For Genius AI Beta Program (theDeepDive)

FULL DISCLOSURE: VERSES AI is a client of Canacom Group, the parent company of The Deep Dive. Canacom Group is currently long the equity of Verses AI. The author has been compensated to cover VERSES AI on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.