Canada slides into recession as oil prices dip

Slumping oil prices take its toll on the Canadian economy. Canada is now officially in a recession for the first time in six years, as crude prices plummet due to supply glut and falling global demand, particularly from China.

Canada's gross domestic product (GDP) for the second quarter shrank at an annualized rate of 0.5%, according to Statistics Canada. In the first quarter, it contracted 0.8%. This puts the G7 economy in a technical recession, which is defined as two consecutive quarters of negative GDP.

"With StatsCan making it official that we did have two consecutive quarters of declining GDP, the recession bugs will be chattering," Bank of Montreal economist Doug Porter told CBC News.

The price of crude, currently trading at below $50 a barrel, is less than half its level last year. This hit growth in the oil exporting country, which trades oil at a discount partly due to lower quality.

To cushion the impact of cheap oil, Canada's central bank has cut interest rates twice this year. It is expected to do so again as early as this month.

The economy has taken center stage in Canada, as people assess their leaders ahead of the federal elections on October 19.

Prime Minister Stephen Harper, who is seeking re-election, has deflected questions on whether the economy is in a recession. He says external forces are to blame for the weakness in the domestic economy, pointing to global market volatility caused by shocks from China. "I think it's more important to describe the reality of the situation rather than to have labels."

Despite declining GDP, Canada may now be headed for a recovery. That's because the economy expanded 0.5% in June, hinting of growth in the third quarter. "In our view, it was a very very mild one in the first half of 2015, but that's behind us now and all indications point to a positive growing economy for the rest of the year," TD Bank economist Randall Bartlett told CBC News.

But south of the border, there are concerns Canada's troubles would spread to the US economy. That's because Canada is America's biggest export market, accounting for about a fifth of US exports.