Economists say data out this week is likely to show that Canada slipped into a technical recession in the second quarter, but the contraction should be short-lived.
TD chief economist Beata Caranci says the benefit of the lower loonie to Canada’s export sector should boost growth in the third quarter.
Read: Canadian economy contracts for fifth straight month
Caranci says that although exports were supposed to see a boost sooner, the sector’s sensitivity to the loonie has diminished over the past decade as the U.S.—Canada’s biggest trading partner—has been importing more from China and Mexico.
TD is forecasting economic growth in the two to 2.5% range in the third quarter, which Caranci says would make another rate cut from the Bank of Canada unlikely.
However, Capital Economics economist David Madani says he anticipates growth in the third quarter to be “unspectacular.”
Madani says business confidence indicators suggest the economy will continue to struggle in the second half of the year, even though it will return to positive growth.
Also read: