But what if they're right?

Finance Minister Bill Morneau is taking his Conservative opponents to task for suggesting that the Canadian economy is at risk of falling into recession. Unveiling his economic and fiscal update earlier this month, Morneau bragged that the economy was in good shape, noting that none of the private sector economists his department talks with was expecting a recession in 2020. I might say, as an erstwhile member of that profession, I take rather less comfort in that consensus than Morneau does. Still, he is undoubtedly right to say that there is not yet much talk of recession among economy-watchers.

Unfortunately for Morneau and the consensus, warning signs keep piling up. The labour market has lost all positive momentum in recent months and recorded a huge setback in November.  Recent reports on manufacturing and retail sales have been weak. Now we see one of the broadest indicators starting to flash amber: StatsCan reported this morning that real GDP fell 0.1 percent in October, a result significantly weaker than expectations.

The biggest culprit for the decline was manufacturing, which saw a broad-based 1.4 percent pullback from the previous month. As StatsCan notes, this was the month of the GM strike in the United States, which had a severe spillover effect on Canada.  Even granting the likelihood that the impact of the GM strike will be reversed when the November data appear, the fact remains that manufacturing has seen declines in four of the past five months, with both durable and non-durable good affected.

The weakness was not confined to manufacturing. Retail trade fell 1.1 percent in the month, its largest monthly decline in more than three years. Wholesale trade, which had provided a boost to GDP in September, also reversed in October. Construction activity overall was flat in the month, while extractive industries posted only a minimal gain amid continuing declines in oil sands activity in Alberta.

Morneau may be justified in warning the Tories not to talk the economy into a recession by scaring consumers and businesses into curbing their spending.  That said, there are now plenty of indications that 2020 will be a tougher year, and there is no doubt that Morneau's fiscal plans do not leave him a lot of leeway if the economy really does start to head into a downturn.

And on that cheery note, may I wish all readers of this blog, wherever and whatever you may be celebrating,  a happy Christmas season!