US GDP shrank marginally in the first two quarters of this year, meeting a commonly-accepted definition of a recession. However it seems unlikely that the NBER, which is the official arbiter of such things, will choose to use that term, firstly because the decline was so small, and secondly because the US economy returned to growth in the third quarter. The Bureau of Economic Analysis reported yesterday that real GDP grew at a 2.6 percent annualized rate in Q3, marginally ahead of expectations. Given that the growth was heavily reliant on the export sector, its sustainability may be questionable, but for now the Fed's goal of achieving a soft landing remains just about on track.
Meanwhile here in Canada, the economy continues to inch ahead. Statistics Canada reported today that real GDP rose 0.1 percent in August, led by the service sector, with retail trade notably strong. The preliminary estimate for September suggests another 0.1 percent gain. If this is confirmed in the final data next month, it would mean that real GDP grew at a 1.6 percent annualized rate in Q3. That is only half the pace seen in Q2, but it is till a far cry from the recession that the media have been loudly proclaiming since at least May.
That recession may still come, of course. The slow pace of growth indicates that both the Bank of Canada and the Fed have very little margin of error in setting policy if they really do which to achieve a soft landing. The Bank of Canada's smaller-than-expected rate move this week may be a sign that the recognize this; we will find out early next month whether the Fed is ready to be equally cautious.
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