What is ‘stagflation’? A closer look at the economic ‘double kiss of death’
Global News
Recession fears loom large for Canadians as the country grapples with U.S. President Donald Trump's tariffs. But economists are also warning of 'stagflation.' What is it?
Trade war fears loom large over Canadians and uncertainty continues over U.S. President Donald Trump’s tariffs, which threaten to upend global trading systems.
While inflation in Canada cooled slightly in March, fears of a recession remain. A report by the Canadian Federation of Independent Business released on Thursday (CFIB) forecast “muted growth” for the Canadian economy in the first quarter of 2025 and a “significant contraction” in the second quarter.
A recession is classified as a period of two consecutive quarters in which an economy contracts.
The report suggests that the Canadian economy grew by a meager 0.8 per cent in the first quarter but will contract in the second quarter. Recessions often lead to stagnating economic growth.
The CFIB report also said inflation in Q1 rose by 2.4 per cent but will rise further to 2.7 per cent in Q2 — well above the Bank of Canada’s target range of two per cent.
The combination of factors is leading to rising warnings from economists about the risk of “stagflation.”
So what is it, and why do some economists call it the “double kiss of death” for an economy?
The term “stagflation” dates back to the 1960s. British politician Ian Macleod is believed to be the first public figure to have used this term in 1965, a period of economic distress in the United Kingdom.
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