bottom in april. job growth resumed in may and accelerated in june. we now estimate that the economy contracted by about 15 percent in the first half of this year. as deep as this is, it suggests the economy has avoided the most dire scenarios we laid out in the april mpr. in the third quarter, we expect to continue to see a strong rebound in jobs and output. however, it was clear to everyone on the governing council that this is not a normal recession. we agreed that the exceptionally strong near - term growth of the reopening phase is likely to give way to a slower and bumpier recuperation phase. as a result, it will take a long time for economic activity to get back even to the level where it was at the end of 2019, before the pandemic struck. there are many reasons why the recuperation phase may be protracted. some businesses will close, while others will be unable to return to pre - pandemic activities. business and consumer confidence have been shaken, and consumers are likely to remain cautious with their spending. 1 / 2 bis central bankers'speeches and many people may find it hard to return to work particularly if schools and child - care facilities cannot fully reopen. we recognize that the burden of this challenge falls disproportionately on women. at the start of the pandemic, as containment measures were put in place to flatten the curve, the government stepped in quickly to replace lost income and help businesses retain their staff and pay their bills. some of these supports have been extended, and more have been announced since early june. these measures have buffered households and businesses from the worst effects of the pandemic and laid the foundation for recovery. the bank ’ s actions were also unprecedented. we lowered the policy rate to the effective lower bound of 25 basis points and launched a range of liquidity facilities and purchase programs to keep markets functioning. this kept credit flowing and supported confidence. with core markets normalizing, we have scaled back some of the short - term liquidity facilities, but we are ready to step up our programs if warranted. as always, our policy actions are grounded in our inflation - targeting mandate. the pandemic is imposing uncertainty on inflation, too. because spending patterns have changed, the consumer price index ( cpi ) doesn ’ t accurately represent the spending habits of canadians right now. so, the bank has been working with statistics canada to create an adjusted price index

cannot directly measure potential output. further, the economic data that measure actual output are often revised - sometimes significantly so. the challenge for us, then, lies in estimating the size of the output gap, and there is always a significant degree of uncertainty around that estimate. so we look at a number of other economic variables to help us form an opinion about how large the output gap is. you can find out more about these variables on our web site. they include, among others, indicators of capacity in goods markets, signs of tightness in labour markets, and signals of pressures in the real estate market. some of these are quantitative, and some are qualitative, based on surveys of businesses conducted by our regional offices. another indicator is the rate of inflation itself. if core inflation - which strips out eight highly volatile components of the consumer price index - is consistently coming in above or below our expectations, it may lead us to adjust our view about the current size of the output gap. earlier, i said that when the economy is operating near its capacity, total demand for canadian goods and services - or what economists like to refer to as " aggregate demand " - is roughly in balance with total supply. total demand has two components - domestic demand and foreign demand. assessing foreign demand is difficult, but because it represents such a large share of total output in canada, we at the bank spend a great deal of time and effort trying to gauge that demand. of course, it is nothing new to say that our economy is importantly affected by events abroad. canada has always relied on international trade. for a long time now, the united states has been the focus of attention in assessing the world economy. but many of today's global economic developments have their origins outside north america, most notably in asia. before i talk about their current implications, i would like to take a few minutes to discuss the nature of these developments and their likely implications over the next decade or so. the medium - term implications of global developments just as japan and korea emerged as major players on the global stage in previous decades, china is now quickly becoming an economic powerhouse. and india is not far behind. when you consider that these two countries account for 40 per cent of the world's population, it is not hard to see why they are having such an impact on the global economy. as we look ahead, it is clear that china and india will be major global competitors, not just in labour - intensive industries, but