Summary
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The U.S. economy is presently facing its first classic consumer recession since 1990-1991. Back then, Canada registered a painful recession marked by the collapse of domestic demand growth and massive job losses.
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As it happens, growth in Canadian domestic demand has only ever crumbled amid monetary tightening by the Bank of Canada, regardless of the duration and severity of the recession in the United States.
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Moreover, history teaches us that real GDP growth in Canada has never sunk into a painful recession without domestic demand growth collapsing.
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Canadian monetary policy is presently light years away from what it was in 1990. This time around, the Bank of Canada is pressing down on the monetary accelerator and stepping up its countermeasures. This will make all the difference.
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Furthermore, the federal government currently enjoys substantial budgetary leeway compared with 1990. This means a major fiscal stimulus could be enacted at any time.
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Consequently, though we are not ruling out the possibility of Canada recording a technical recession, given the severity of the U.S. downturn, brandishing the spectre of a serious recession in Canada akin to those of 1990 or 1982 does not seem warranted.
