The Bank of Canada admitted on Wednesday that Canada was in Recession. Well sort of.

Bank of Canada Governor Stephen Poloz is afraid to speak the “R-Word”. Instead, Poloz phrased it this way: “Real GDP is now projected to have contracted modestly in the first half of the year.“

Shades of Voldemort

Poloz further went out of his way to state the “R-word is unhelpful”.

 Pressed by reporters to just come out and use the R-word, Poloz dug in.

“I just find the discussion quite unhelpful,” he sniffed. “It's especially unhelpful when what has happened to the economy is very narrowly defined.”

Recession an Easy Call

Calling the Canadian recession was one of the easiest calls ever. I did so on January 31, in Canada in Recession, US Will Follow in 2015. 

What made the Canadian recession an easy call was the Canadian yield curve inverted out to three years following a surprise rate cut by the Bank of Canada on January 21.

It remains to be seen if the US follows. The US contracted in the first quarter, but the second quarter rebound was a bit stronger than I expected. 

On January 21, in response to the surprise cut, I wrote Canadian Recession Coming Up: Yield Curve Inverts Following Unexpected Rate Cut; Loonie at Six-Year Low.

In that post I awarded Canada the “Blue Ribbon” for the first yield curve inversion of any major country following the great financial crisis.

Denial Sets In Already

Two consecutive quarters of GDP contraction are a sufficient but not necessary condition for recession. Indeed the NBER, the official arbiter of US recessions, has called the start of recessions in quarters in which GDP was positive.

I have not seen anyone deny a recession when there has been 2 quarters of negative growth, “mild” or not, until now.

The Globe and Mail amusingly claims Canada's Fall into Recession Far from a Sure Thing.

 The question of whether Canada slipped into a recession in the first half of 2015 may depend on our definition of “recession.” And most of us have been using the wrong one, says one of the country's top experts on measuring business cycles.

Many commentators pointed at the Bank of Canada's revelation this week that the Canadian economy likely contracted in the second quarter as evidence that the country met the “technical” definition of a recession: two consecutive quarters of declining gross domestic product. Indeed, much was made of Bank of Canada Governor Stephen Poloz's unwillingness to even utter the word “recession” after the central bank's interest-rate cut Wednesday.