Economists Foresee Canada's Recession May End By Summer

June 2, 2009 11:38 a.m. EST

Ottawa, Ontario (AHN) - Although the data released by Statistics Canada Monday confirmed Canada is officially in a recession, the numbers indicate the country may get out of it earlier than expected.

Economists are of the opinion that Canada's economic recovery may start as early as summer following the release of its first quarter gross domestic product contraction by 5.4 percent on an annualized basis.

The economic contraction, Ottawa's second consecutive negative GDP, was however lower than expectations. Toronto Dominion Bank forecast a minus 5.8 percent GDP Q1 growth rate, while the Bank of Montreal predicted a negative 6.7 percent GDP.

TD economist Diana Petramala, in a commentary, said economic activity will likely continue to shrink until the third quarter of this year. Petramala wrote, "We have seen some signs of hope that a recovery may be near - due to an easing in credit conditions, a possible bottom in the U.S. downturn, and a nice rally in stock markets since March. We continue to look for a recovery in the last quarter of 2009."

BMO economist Douglas Porter wrote there is a large and growing body of evidence that conditions have improved since the first quarter, and this suggests the GDP decrease in the second quarter will be much less severe. Porter's forecast for Q2 annualized rate is minus 2.4 percent.

Porter pointed out, "Among the G7, only France posted a smaller contraction in Q1 than Canada. But most importantly, there are a number of compelling reasons to firmly believe that conditions have strengthened substantially from those dark days early this year."