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David Rosenberg: Canadian Rail Blockages May Reduce Canadian GDP by Half Percent, Recession Likely

Submitted by Taps Coogan on the 23th of February 2020 to The Sounding Line.

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David Rosenberg of Rosenberg Research recently spoke with Bloomberg about the potential for a recession in Canada amid major blockades of the Canadian rail network and the Coronavirus outbreak. Mr. Rosenberg says that if the blockades continue, they could reduce first quarter GDP growth by half a percent and that because real GDP growth per capita in Canada is already slightly negative, a technical recession is likely.

Some excerpts from David Rosenberg:

“The problem in Canada is that the baseline for GDP growth was already not even 1%. It’s below potential… and if (blockades) last for another few weeks, you could probably knock off about half a percentage point off of first quarter GDP growth, which is not insignificant…”

“Basically when you look at the Canadian economy in GDP terms, …adjusted for inflation, and per capita, it’s already fractionally negative. Now, that doesn’t fit into the technical definition of a recession, but things are very weak as it is. So all this does is it complicate the outlook… I look at the Canadian economy and we are really a torque on global GDP.”

With respect to the Coronavirus:

“China is not just the industrial giant is once was. Its actually become a a large scale consumer-service economy. And that’s what’s actually spread around the world. It’s what’s happening with travel and tourism and of course, those stocks have been hit the most… The (economic) impact is going to be a lot bigger in terms of global GDP. I could see Chinese GDP growth for this quarter and next quarter being hit and at least 4% lopped off a part of the world that is now 16% of (global) GDP. All of a sudden, you’ve taken half a percentage point off of global GDP growth. For countries like Canada, Australia, New Zealand, that …are very sensitive to shifts in the world economy, that’s gonna come back and bite us pretty hard.”

“I still say the odds of recession (in Canada) are well over 50-50. I remember being on record saying 80%.”

There is more to the interview, so enjoy it above.

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