09/13/2011 10:03 EDT | Updated 11/13/2011 05:12 EST

Canada Economy: Country Could Lead Developed World Into Recession, Scotia Warns


OTTAWA - The Bank of Nova Scotia is warning that Canada could be among the first of the world's advanced economies to fall into a another recession.

The bank's economists say Canada could produce a second negative quarter in the three-month period ending this month.

That would constitute a technical recession, defined as two quarters of negative growth. Canada's economy contracted by 0.4 per cent in the April-June period.

The economists say July's strong trade numbers will give a lift to the economy in the third quarter, but business investment has fallen off.

Add to that an inventory overhang, flat housing and government spending cutbacks and there is not much going for the economy, they say.

In the last two days, the Royal Bank and TD Bank have both released new forecasts predicting the second half of this year will see slower growth, but they stopped short of predicting an outright slump.