Canada is a big petroleum exporter, so the slump in crude prices, which is currently below $50 per barrel, has put the country into a recession for the first time in six years, according to CNN.
Official data Statistics Canada released shows second quarter gross domestic product (GDP) fell by 0.5 percent on an annual basis. Additionally, first quarter GDP dropped 0.8 percent, reports CNN, which puts Canada in a technical recession.
Slowed global growth and too much supply have slammed oil prices, which has had a detrimental effect on Canada’s already discounted heavy oil trades. Depressed crude prices and the uncertain outlook have forced companies to slash spending and delay projects across Canada’s oil sands industry.
Canada’s economy is experiencing troubles in other segments as well, such as the housing market.
CNN expects Canada’s troubles will have a negative effect on the United States because Canada is the biggest U.S. export market and accounts for about 20 percent of U.S. exports.
“[The] outlook for the Canadian economy suggests that it poses a significant downside risk to the U.S. growth outlook,” says Bricklin Dwyer, BNP Paribas economist.
Bricklin says the situation in Canada is expected to improve. However, he says there is still a risk of bigger shock to U.S. exports.
