So this is what it's like, not living on an island.
Economists and policy makers say they still see modest growth, globally and in Canada, not a new slump. But most analysts agree that if the U.S. and the rest of the world fall into recession because Europe is unable to prevent a banking meltdown, there is precious little anyone on this side of the border can do to keep Canada's economy from following suit.
A report on Friday from Statistics Canada will likely show the economy grew by between 0.2 per cent and 0.4 per cent in July, confirming that the domestic economy is not in recession despite the 0.4-per-cent annualized contraction that took place between April and June. Even if July turns out to be the highlight of the third quarter, most economists see the three-month period producing annualized growth of 2 per cent.
The question is, what comes next?
Much of the boost since July has been from a sharp turnaround for industries that basically shut down in the previous quarter because of temporary factors like the Japanese earthquake and wildfires in Alberta. If that resulted in over-production, as some economists suspect, then sustaining growth in the months to come will depend on a bounce in consumption by businesses and households.
This does not seem likely, given the cascade of doom-and-gloom since August, which reached new levels last week when U.S. Federal Reserve chairman Ben Bernanke warned of "significant downside risks" to Canada's No. 1 export market.
Doug Porter, deputy chief economist at BMO Nesbitt Burns, said Friday he is maintaining his call for the economy to grow by 2.2 per cent this year, but cutting his 2012 forecast to 1.8 per cent from 2.2 per cent. Either way, his predictions are a far cry from the pre-crisis 20-year average of 2.8-per-cent growth.
The Bank of Canada will almost certainly downgrade its own projections in late October. Last week, Governor Mark Carney acknowledged that the risk of another U.S. recession has risen and expressed increasing alarm with the dithering and questionable moves by policy makers on either side of the Atlantic in recent weeks.
Still, he urged Canadian businesses to avoid feeling "paralyzed" and to forge ahead with steps needed to make themselves and the economy more resilient. Namely, increasing their links with faster-growing emerging markets – in part to take advantage of high commodity prices while exports to the U.S. and Europe languish – and investing in new plants and equipment to make themselves more productive for the long haul.
Doing so will gradually reduce Canada's dependence on the moribund advanced economies and, consequently, make it less of a given that whenever they go down, so do we.
And there are encouraging signs that this process is already well under way.
But when the present, and immediate future, are so terrifying, it's difficult to keep on thinking boldly and investing for the long term – even when you know your life depends on it.