Add to that the drop in the value of the Canadian dollar, and the fact that the election of its prime minister is only a few weeks away (October 19), and you’ll find reasons enough to justify the concern of many business owners.

There’s a debate going on in Canada: Was the country in a recession during the first two quarters of the year – or not? By strict definition (two straight quarters of contraction), the answer is yes, but some economists question the validity of that definition. How could the country be in a recession while employment and housing remain strong, they ask, and while the downturn is only in the central part of the nation – in particular, Alberta?

The economy of Alberta has been tightly tied to the extraction of oil from its voluminous oil sands, a costly method of oil production. When energy prices collapsed so did Alberta’s oil production; there also were a few other factors involved.

“Faced with a collapse in energy prices, widespread drought, forest fires and the uncertainty of an untested government, the engine that drove much of Canada’s growth over the past decade has seized. Alberta’s economy is expected to contract this year.”

That’s according to Justin Giovannetti in The Globe and Mail.

Lower oil prices also have negatively impacted the oil-producing economies of Saskatchewan and Newfoundland. However, it’s best to keep in mind that crude oil represents just three percent of Canada’s GDP.

Manufacturing

In the late 2000s and early 2010s, manufacturing in Canada was negatively impacted when high oil prices drove up the value of the Canadian dollar, making its factories less competitive. Now the value of the “loonie,” as Canadians call their currency, has been dropping along with oil prices, so one would think manufacturing would be roaring back. 

Not so. Factory sales rose just 1.2 percent in June, but were 3.1 percent below their level a year earlier. That failure of manufacturing to respond to the weaker currency is one reason why the economy contracted in the first half of 2015.

According to The Economist, “In 2000, manufacturing accounted for 18 percent of GDP; by 2013 it had dropped to 10 percent. Factory employment has fallen by about 500,000 since 2005. In the decade leading up to 2012, some 20,000 factories shut down; today, only 54,000 factories are in operation.

“One big problem is that Canada mostly makes components, not final products. That leaves manufacturers vulnerable when their customers move. Car-parts makers used to be well-placed for deliveries to carmakers in Michigan, but many of their customers have moved south.”

That being said, unemployment in Canada remains at a surprisingly low rate – from a recent high of 8.3 percent in 2009, it dropped to 6.9 percent in 2014, a forecast of 6.8 percent in 2015, and an even lower forecast of 6.6 percent in 2016.

Housing

The housing industry in Canada is a bit like the iconic Energizer Bunny – it just keeps on going and going. 

According to Mark Hopkins, senior economist at Moody’s Analytics, “It (housing) seems to not only be defying the large downturn in the global economy, but even now, with gross domestic product contracting, it seems as though existing home prices have accelerated, which is a bit strange and counterintuitive.”

The national average price of a home in Canada is $440,000, which is up nine percent from 2014. That figure is greatly skewed by Canada’s most active markets, namely the Greater Vancouver and Greater Toronto areas. Remove those two pricey behemoths from the equation, and the average price plummets to $331,000.

So, what does $440,000 buy someone shopping for a home in Canada? It varies dramatically by city and region.

In Calgary, Alberta, it would buy you a 1,321 sq. ft. condo with two bedrooms and two baths.

In the Greater Vancouver area it would buy you a 925 sq. ft. condo with two bedrooms and two baths.

In Brandon, Manitoba, it would be a two-story, 1,510 sq. ft. detached home with four bedrooms, three baths, a patio and an attached garage.

In Moncton, New Brunswick, it would be a two-story, 4,900 sq. ft. detached house with four bedrooms, four bathrooms and an attached garage.

In Halifax, Nova Scotia, it would be a 2,500 sq. ft. detached home with four bedrooms, three baths and a detached garage.

In the Greater Toronto area, you would squeeze into a 900 sq. ft. condo with two bedrooms and two bathrooms.

In the Greater Montreal area you would have a 931 sq. ft. duplex with two bedrooms and one bathroom (hey, it’s my turn!).

In Quebec City, it would be a two-story, 2,072 sq. ft. detached home with four bedrooms, two bathrooms and an in-ground swimming pool (la vie en rose!).

And in Chibougamau…no, let’s forget about that one, just not enough nightlife.

By Fareed Zakaria, Global Public Square

"While we have been watching the Islamic State and discussing Iran, something much bigger is happening in the world. We are witnessing a historic fall in the price of oil, down more than 50 percent in less than a year. When a similar drop happened in the 1980s, the Soviet Union collapsed. What will it mean now?

“Nick Butler, former head of strategy for British Petroleum (BP), told me, ‘We are in for a longer and more sustained period of low oil prices than in the late 1980s.’ Why? He points to a perfect storm.

“Supply is up substantially because a decade of high oil prices encouraged producers throughout the world to invest vast amounts of money in finding new sources. Those investments are made and will keep supply flowing for years.

Nick Butler.

“Leonardo Maugeri, former head of strategy for the Italian energy giant Eni, says, ‘There is no way to stop this phenomenon.’ He predicts that prices could actually drop to $35 per barrel next year, down from more than $105 last summer.

“A primary reason for the accelerated price decline is that Saudi Arabia, the world’s ‘swing supplier’ – the one that can most easily increase or decrease production – has decided to keep pumping. The Saudis ‘know it hurts them but they hope it will hurt everyone else more,’ says Maugeri, now at Harvard. One of Saudi Arabia’s main aims is to put U.S. producers of shale and tight oil out of business.

“So far, it has not worked. Though battered by plunging prices, U.S. firms have used technology and smart business practices to stay afloat. The imminent return of Iran’s oil – which markets are assuming will happen, but slowly – is another factor driving down prices. So is the increasing energy efficiency of cars and trucks.

“Major oil-producing countries everywhere are facing a fiscal reckoning like nothing they have seen in decades, perhaps ever.”