Huge trouble? While there is an economical slowing in the oil patch, exactly as expected, the government most recently posted a surplus.
Canada is a bit odd relative to oil given that a pretty large contingent of Canadians are really on the fence about exporting fossil fuels. Even in Alberta, the province where most of the oil action happens, the provincial government was recently taken over by a party that you could almost call anti-oil (to the limits of pragmatism).
Huge might be an exaggeration, but Canada is in a lot of trouble.
1) Six of the last seven months have seen economic contraction. There's no reason to think that's going to get better soon, given what's happening to the global economy, China and commodities. Oil has continued to get cheaper, commodities have continued to go down, and China's economy is getting sicker.
2) Canada's real estate bubble will be popped by the recession. That'll make the damage a lot worse. The constantly rising housing market was contributing temporary, artificial growth to the economy for the past decade.
This is going to be a drawn-out downturn. China is going to have an extremely difficult ten plus years due to their debt burdens, and the fact that all the easy growth ended years ago. The historic cheap dollar years from 2002-2014 are not likely to return, the high dollar will continue to put pressure on commodities, and countries dependent on commodities. Canada won't grow again unless the dollar drops, or the global economy booms, either of which would send commodities higher.
I replied to someone claiming that Canada was in "huge trouble". It isn't in huge trouble. You have provided conjecture, but the truth is that it's exactly the same conjecture we've been hearing for around 15 years. By that reasoning, Canada has always been in huge trouble.
Most commodity prices are doing superbly (oil is an outlier). Food prices are at all time highs. Canada's economy has faced far more of a disruption from normal globalization and mega companies shifting production elsewhere, than any hewer or wood miner of minerals disruption. It will always face threats and will always be adapting.
It's not the same conjecture. It's a fact that Canada is in a recession right now. Their economy is highly dependent on the price of commodities. The price of commodities is primarily determined by the dollar and demand. The dollar is high and is going to stay there. Demand is toast. It's obvious what outcome that is going to spell for Canada.
Nearly all commodities are lower than a year ago, and half of them have crashed. Oil is the opposite of an outlier.
Copper has gone from $3.30x, to $2.20x in a year. Copper is considered a critical bell-weather commodity. Demand for copper has fallen off a cliff.
Iron Ore has crashed by 60% in less than two years, and is down 40% in just one year.
Coal has dropped by over 20% in one year.
Steel prices are down 30% in one year.
Platinum has gone from $1500x to $992.
Natural gas was $4 last year this time, and it's $2.60x now.
Heating oil and gasoline have crashed with oil.
Sugar has dropped by 50% in a year, on a non-stop crash.
Lumber is down by 1/3 in a year, and has crashed.
Coffee is down by 40%.
Corn, wheat and orange juice are all down slightly versus one year ago. Rice is down about 15% vs a year ago. Soybeans are down 13%. Soybean oil is down over 20%.
I was under the impression that BC and Alberta were natural resource economies which don't deal well with a high US dollar, but Ontario actually does well with a high US dollar. Also, a high US dollar makes US out-sourcing to Canada (as well as film industry on-location shooting) a great value.
What threw Canada into a recession, is that they don't have enough other export offsets against the commodity & China weakness. They haven't managed to diversify their economy much in the last ten years. It has become an active topic of discussion since their economy began contraction, with everyone throwing around blame. So while the loonie has taken a hit [1], that isn't going to bump exports very much.
Canada is a bit odd relative to oil given that a pretty large contingent of Canadians are really on the fence about exporting fossil fuels. Even in Alberta, the province where most of the oil action happens, the provincial government was recently taken over by a party that you could almost call anti-oil (to the limits of pragmatism).