The Globe and Mail reports in it Tuesday edition that the probability of a recession in Canada is "small but rising," Bank of Nova Scotia says.
The Globe's Michael Babad writes that Scotiabank senior economist Nikita Perevalov was responding in a report to all the chatter of late about the risk of a recession in the United States in the wake of the temporary inversion of the yield curve.
However, "Our work finds that looking at the yield curve in isolation provides an incomplete picture of recession risk," Mr. Perevalov said, citing market angst based on a recession-risk model by the New York Federal Reserve.
"To properly estimate risk of recession in Canada using the yield curve, we must include consumer confidence in Canada and the NY Fed's probability of a U.S. recession."
The yield curve inverted in March in Canada, but other factors are in play. "While the yield curve is flashing warning signs, the fact that consumer confidence grew each month from January to March suggests that conditions are still benign," he said.
"While a recession is not very likely in the next few quarters, this probability is gradually rising: The model-implied probability of a recession in Canada increases to 11 per cent in 2020."
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