Bank of Canada's Monetary Policy Report released

from this morning's Royal Bank of Canada's Daily Economic Update (10/23):

Monetary Policy Report paints somber picture of growth in both Canada and the United States

"The statement issued by the Bank of Canada following Tuesday’s policy meeting, when the overnight rate was cut by 25 basis points to 2.25%, indicated significant revisions to the economic outlook for both Canada and the United States. The Bank indicated that it was projecting that the U.S. economy was already in recession. The statement also indicated that in the face of weaker U.S. and global growth, lower commodity prices and tighter credit conditions, the outlook for Canada’s growth rate was also being cut. The reduction was most marked with respect to 2009 — the expected increase in GDP was slashed to 0.6% from a 2.3% gain projected in July, although it did not suggest the Canadian economy was expected to fall into recession. This morning’s Monetary Policy Report (MPR) provides more detail on these revisions along with the implications for the Bank’s outlook for inflation.

The quarterly pattern of growth in Canada is one of an economy avoiding a recession but by the barest of margins. The central bank is projecting a 0.4% annualized decline in the fourth quarter followed by no growth in first quarter of 2009. (Growth in the third quarter of 2008 is projected to remain in the positive column, rising 0.8%.) This base case forecast clearly leaves the Canadian economy vulnerable to falling into recession in the face of any intensification of the negative factors weighing on the economy. Growth returns the positive column in the second quarter of 2009 of about 0.8% followed by relatively stronger activity in the second half of next year with growth in the third and fourth quarters averaging 2.2%. On an annual basis, this quarterly profile translates to growth of 0.6% in 2009 (unchanged from a projected 0.6% gain expected this year) but then jumps to 3.4% in 2010." ...

for the Bank of Canada's reports