It isn’t official yet, but today’s GDP numbers hail a recession, say economists.

Real GDP dipped 0.1% in July following an unrevised 0.2% drop in June. The year-over-year rate was slashed to a paltry 0.4%.

BMO Nesbitt Burns says that it expects the third quarter to register a 0.5% decline. “Two monthly GDP declines in succession do not a recession make, but it is now quite clear that the Canadian economy was already on the ropes even prior to the terrorist attacks earlier this month,” it says.

“Canada’s economy remains locked in a downward spiral, with the first recession in 10 years beginning to take its toll on a growing number of once-formidable industries,” says CIBC World Markets. “Unfortunately, July’s bad news looks to be only a taste of what’s to come, keeping the door wide open for aggressive Bank of Canada easing in the weeks and months ahead.”

RBC DS Capital Markets Research says that, “Hopeful signs in April and May that the manufacturing sector was on the road to recovery were brought into question in June and firmly stomped out in July under widespread declines.” Activity contracted in 14 of 21 major categories.

“The high-tech sector took the unenviable pole position here. The forestry industry also suffered a sharp setback in the month, faced with too many adversaries: stagnating domestic housing demand, weakening U.S. economy and an unresolved Softwood Lumber Agreement. The service-producing sector turned in a flat performance.”

“As bad as Canada’s recent GDP results have been, they are bound to get worse. Jobs continued to vanish in August, and the US terrorist attacks will take a heavy toll on September output. All this points to a rather bleak performance for Q3 GDP, with a more than 1% annualized decline expected. The other shoe looks to drop in the fourth quarter, with a second consecutive retreat in GDP providing unambiguous proof of a recession that began months ago,” says CIBC.

BMO agrees, noting that, “This soft report all but locks in a decline for Q3 GDP, and we expect Q4 to be even weaker. In this environment, the Bank of Canada will continue to match rate cuts by the Fed, even with the Canadian dollar again flirting with record lows.”

CIBC concludes, “The combination of falling growth and moderating inflation make a strong case for an aggressive 50 bps rate cut by the Bank of Canada come October 23. However, the Bank’s course of action could still be altered by Tuesday’s Fed decision (where a modest quarter-point cut remains an outside possibility) and by September’s employment results (also due next week).”