– The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies through research that is nonpartisan, evidence-based and subject to definitive expert review.
CANADA – A new business cycle measurement developed by a C.D. Howe analyst provides further evidence that there was no recession in 2015, according to a new Institute report. In “Taking the Economic Pulse: An Improved Tool to Help Track Economic Cycles in Canada,” author Jeremy Kronick fills a crucial data gap with a new and improved diffusion index that accurately measures how economic shocks spread throughout the economy.
“When Statistics Canada stopped producing their diffusion index, it left a major gap for policymakers trying to accurately track booms, busts or ripples,” commented Kronick. “This new tool will empower public decision-makers with accurate assessments of the economy so that they can make wise policy decisions.”
The new diffusion index provides a better measurement of how widespread economic shocks are throughout the economy by stripping out transitory events, such as a strike or weather-related events. Only true cyclical changes across industries are captured by this new measure..
The new measure provides further evidence that the negative oil price shock that led to a contractionary economy in the first half of 2015 was not widespread enough to warrant a recessionary call. As well, this new measure indicates an additional quarter of greater contractionary than expansionary industries at the end of the 2008-2009 recession.
