Capital Formation Slumps. Current Account Deficits Widen. The Dollar has fallen almost 20% in the span of 6 months and remains under pressure.

The Canadian economy is no longer the darling of the G7, now that it is experiencing recessionary conditions;
To a large extent, the weakness is due to totally exogenous forces and out of the hands of Canadian policy makers, e.g. the stunning decline in all commodity prices ;
To a lesser extent, a relatively tight monetary policy combined with an overvalued exchange rates are well within in the purview of the policy makers.

On July 15th the BOC meets to set the bank rate. Upper most in their minds will be the ‘atrocious’ first quarter and, in particular, the weakness in the external sector, so vital to the health of the Canadian economy. A lot will be riding on that meeting. Stay tuned.

To avoid the technical measure of a recession, the economy needs to record increases of 0.2% and 0.3% in May and June, respectively---- a tall order given the performance to date. Analysts are whispering among themselves on the probability of a full recession by the end of the summer.