By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
Partner, RSD Solutions Inc.
This week the latest economic statistics for Canada will be
reported. GDP growth in particular will
receive extra attention as Canada is in the middle of an election, and also as
there has been negative GDP growth due to the fall of oil prices. The big debate will be whether or not Canada
is in a recession.
The spin doctors from all political parties are all over this, as is
the media. In essence everyone wants to
know whether or not Canada is in a recession.
The question is; what is the technical definition of a recession? While GDP growth has been negative, it is
more of a technical issue due to the change in the price of oil. If oil was back anywhere near $100, then it
is likely that this is a non-issue.
After all, economic activity has not really changed, employment has not
really changed, and absent the media constantly stirring the issue up it is
also likely that consumer confidence has not really changed.
Too often in risk management we also get caught up in
definitions. Rarely however is the
precise definition important. Also if a
definition can only be understood or implemented by a professional then it is
likely to be of very limited use.
Ronald Reagan was one who did not have time for
definitions as he famously demonstrated the uselessness of economic
classifications and definitions by asking simply “are you better off than you
were four years ago?” Not a bad risk
question to ask as well.
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