Although the Bank of Canada expects the shock from crude oil’s collapse to be “front-loaded” toward the beginning of the year, the latest economic data now suggest the country’s economy may have contracted during the second quarter as well.

For those keeping tabs, a second consecutive quarterly decline following a drop of 0.6% in first-quarter growth would fulfill the textbook definition of a recession.

While Statistics Canada won’t have its numbers for second-quarter gross domestic product (GDP) ready until the end of August, the government agency has released data for April, which showed growth declined by 0.1% month over month.

Put that together with a near-record CAD3.3 billion trade deficit for May, and then add in out-of-control wildfires in the resource-rich provinces of Alberta and Saskatchewan, and it looks like even a flat result for the second quarter would be quite a feat for the economy.

In order for GDP just to keep pace with the prior comparable period, CIBC economists say the economy would have to have grown by at least 0.2% and 0.3% in May and June.

That’s increased the possibility that the central bank will cut its benchmark interest rate at next week’s meeting. In fact, according to futures data aggregated by Bloomberg, traders are now almost even split on whether the Bank of Canada (BoC) will cut rates by a quarter point, to 0.5%, next Wednesday.

Given the new challenges that are emerging in the global economy, including the possibility of a crack-up in the European currency union and the ongoing crash in China’s stock market, and it would seem prudent for the bank to extend its “insurance policy” with further monetary easing.

Indeed, those two worrisome portents have already sent oil prices tumbling again, with North American benchmark West Texas Intermediate down 16.1%, to $51.53 per barrel, since it hit a year-to-date high a little less than a month ago.

Clearly, that adds more turmoil to the already-beleaguered oil and gas sector. But we already knew it would be tough going for this space, even without these new setbacks.

So what about Canada’s other sectors?

Two widely watched business surveys were released on Monday.

The BoC’s quarterly Business Outlook Survey, which is based on interviews conducted with the senior executives of about 100 firms across Canada, showed some “encouraging signs,” as the bank put it.

Although recent trade data suggest that the bank’s long-awaited rise in non-energy exports has yet to materialize, the BoC reports that manufacturers see an increase in future demand from customers in the U.S., based on advance orders and inquiries. They also note that the lower exchange rate has helped boost sales activity.

That’s a key development, since the U.S. absorbs about three-quarters of Canada’s exports. Consequently, Canada’s economic resurgence largely hinges on demand from its neighbor to the south.

Overall, the balance of opinion indicates that companies expect to see a “modest acceleration” in sales growth over the next 12 months, though that outlook is muted compared to a year ago.

At the same time, firms in sectors that operate outside the oil and gas arena but are situated in proximity to Alberta expect to see a knock-on effect as the oil shock dampens spending. Thankfully, the bank notes that domestic demand is strengthening in other regions.

On the future growth front, investment intentions have increased from the first quarter, particularly among manufacturers and other businesses in Central Canada. Exporters who are enjoying higher margins from U.S. dollar-denominated sales plan to reinvest some of the additional earnings into machinery and equipment.

Also on Monday, Statistics Canada released its latest review of investment intentions for the year, based on surveys of 25,000 public and private companies across the country.

Overall capital spending is expected to decline by 4.9% year over year, to CAD251.8 billion. However, the 18.7% drop in planned capital expenditures in the oil and gas sector weighed heavily on that number, since the resource space had accounted for nearly a third of all business spending in the prior year.

The two biggest bright spots were the retail and transportation sectors, which plan to increase spending by 7.7% and 13.4%, respectively. Meanwhile, manufacturers expect to raise spending by 2.7% this year.

To be sure, these numbers don’t give us a lot to cheer about. But they do suggest there’s some room for optimism despite the gloomy headlines.

The good news is that the market doesn’t always march in lockstep with the economy. Like its developed-world peers, Canada’s economy has struggled to recover from the generational downturn in 2008-09.

And while Canada’s economic woes appear to be deepening in the near term, the country’s stock market has yet to mirror the economy’s performance. In fact, the S&P/TSX Composite Index is trading a little less than 8% below the all-time high it hit last September, despite the subsequent oil shock.

But even if the market ends up suffering a steeper correction, our income-oriented approach to stock selection means we can continue collecting dividends—or reinvesting them and compounding our wealth—until better times ahead.

Editor’s Note: Based on subscriber feedback, we’ve decided to eliminate the wider How They Rate coverage universe in favor of concentrating more on the legacy Conservative and Aggressive Portfolios.

So we’ll now be spending even more time monitoring these holdings and providing updates on their latest news along with our analysis and ratings.

As noted in the last issue, there are three securities in the legacy Conservative and Aggressive Portfolios that are also current recommendations in The Dividend Champions Portfolio: Pembina Pipeline Corp. (TSX: PPL, NYSE: PBA), ShawCor Ltd. (TSX: SCL, OTC: SAWLF), and WestJet Airlines Ltd. (TSX: WJA, OTC: WJAVF/WJAFF).

As such, these stocks will now be tracked in The Dividend Champions Portfolio. So please look for the latest data and ratings on these three stocks there instead.

The Dividend Champions: Portfolio Update

By Deon Vernooy

Over the past week, three of our Dividend Champions made news.

Brookfield Infrastructure Partners LP (TSX: BIP-U, NYSE: BIP) made a non-binding offer to acquire Asciano Ltd., an Australian rail freight and cargo port operation, for AUD8.8 billion (USD6.8 billion), or AUD9.05 per share. The cash-and-equity offer represented a 36% premium on Asciano’s June 30 closing price.

Asciano owns and operates a 3,420-mile rail network in Western Australia and is in the process of completing a major AUD3 billion freight equipment overhaul. In addition to trains, Asciano also operates container terminals and port facilities to move raw resources as well as retail products by land and sea.

Asciano’s share price has been in a slow upward trend since 2012 and is currently valued at 8.8 times forward EV/EBITDA (enterprise value to earnings before interest, taxation, depreciation and amortization). This valuation is more or less in line with other similar companies.

Brookfield Infrastructure currently has a USD7.2 billion market capitalization and owns and operates utilities, transport, energy and communications infrastructure assets in North and South America, Australia and Europe.

The talks are in an early stage, but if the deal is consummated it would be an attractive addition to the Brookfield portfolio. However, this will be a large acquisition for Brookfield, which implies that it could need to line up partners to finance the transaction.

Brookfield Infrastructure is a buy below $55.10.

Fortis Inc. (TSX: FTS, OTC: FRTSF), the Canada-based utility company, has been hard at work selling non-core assets over the past few months. In the latest transaction, the company sold 22 Canadian hotels for CAD365 million to a private investor.

This was preceded in June by the sale of 2.8 million square feet of leasable space for $430 million to Slate Office REIT (TSX: SOT-U). As part of the transaction, Fortis agreed to buy approximately 15.5% of Slate’s units, for a total consideration of $35 million.

Fortis owns and operates a North American electric and gas utility asset portfolio worth around $28 billion, with 2014 revenues of $5.4 billion. Total debt amounted to CAD11.5 billion at the end of the 2014 financial year.

Though these transactions are relatively minor for a firm of Fortis’ size, we view the streamlining of its operational structure as a positive.

Fortis is a buy below $37.91.

WestJet Airlines Ltd. (TSX: WJA, OTC: WJAVF/WJAFF), announced operating results for the second quarter that were somewhat worse than analysts had expected, resulting in a 5% drop in the share price following the announcement.

Even so, management confirmed that the second quarter will deliver record profits. In addition, guest traffic increased by 5.5% in the quarter, while the capacity of available seats climbed by 7.5%. Costs per available seat mile (excluding fuel) are only expected to rise by 0.5%, which is better than previously anticipated.

However, news that the load factor declined by 1.5%, to 78.1%, and that the revenue per available seat mile fell by 5.7%, indicated that WestJet is struggling to fill their additional capacity. By comparison, the resurgent Air Canada (TSX: AC) announced in their quarterly update an increase in capacity of 10.5%, with a load factor of 85.7% for the second quarter.

When taken together, these results show that Canadian airlines are rapidly adding capacity, and that Air Canada is doing a slightly better job than WestJet when it comes to filling those additional seats.

On the plus side, both airlines are growing their businesses and have the benefit of lower fuel costs–savings which they have yet to pass along to customers.

WestJet is a buy below $28.99.