There are many ways for a government to spin the news that the economy it manages may have entered a recession.

Stephen Harper, Canada's Conservative prime minister, tried breeziness. "I've seen a lot worse," he said at the Calgary Stampede, a rodeo that attracts about 1 million visitors.

Joe Oliver, the finance minister, went for stubborn optimism. "We are going to see solid economic growth this year," he insisted.

The numbers argue against him. The economy contracted at an annual rate of 0.6 percent in the first quarter of this year. The second was no better, says Emanuella Enenajor, an economist at Bank of America.

If so, the economy was technically in recession. This is awkward for Harper, who hopes to win another term in office in a national election to be held Oct. 19.

He had planned to achieve that by boasting about the Conservatives' economic record. Until recently he had grounds to do so.

Canada indulged less than others in the credit spree that led to the 2008 financial crisis in Europe and the United States. As the crisis ebbed it grew faster than most other big economies, thanks to a boom in commodities, especially oil.

But with the sharp fall in oil prices over the past year, Canada now threatens to move from leader to laggard. The consensus forecast for economic growth is around 2 percent in 2015, which would put Canada in the middle of the pack of G-7 economies, but that will probably be revised downward.

In that rich-country group, only France and Italy have higher unemployment rates.

Growth is now dangerously dependent on consumer credit and rising house prices, both of which could swiftly drop. The average price of a detached house in Vancouver is $1.1 million (U.S.); in Toronto it is $868,300.

The central bank thinks housing is overvalued by as much as 30 percent; the biggest domestic risk to growth is overborrowing by consumers, most of which is housing related, it warns.

Philip Cross, a former chief economist at Statistics Canada, points out that the share of income that households need to service their debt is at an all-time low. But he worries about what will happen if interest rates or unemployment suddenly rise. Canada, which escaped the worst effects of the rich world's credit bubble, may be creating a smaller one of its own.

As energy industries slowed, others were supposed to take over. Economists expected that a weaker Canadian dollar would boost demand for manufactured goods, especially from the United States.

That has not happened. Exports to Canada's southern neighbor, including oil, were 6.5 percent lower in May than during the same month last year. Manufacturing output shrank in April for the fourth consecutive month.

Partly as a result, private investment is falling. Energy firms, which account for around a third of capital spending, are expected to slash investment by nearly 40 percent this year. This is just the first wave of cuts, warns Jock Finlayson of the Business Council of British Columbia.

Manufacturers have little more appetite for risk. In 2012, Mark Carney, who was then governor of Canada's central bank, chided firms for sitting on "dead money."

"That money is still dead," says Glen Hodgson of the Conference Board of Canada, a think tank. The only bright spot is tourism, which is not a big enough industry to lighten the national gloom.

Harper could, if he chose, provide a boost. Canada's government debt burden as a share of GDP is the lowest among G-7 countries. It therefore has room to borrow and build more roads and bridges. But the Conservatives, who believe in small government and low taxes, are loath to do that. Oliver has ruled out spending any more on infrastructure than the $4.58 billion (U.S.) he promised last November.

The central bank faces a trickier task. It unexpectedly cut its benchmark lending rate to 0.75 percent in January, when the economy was already looking sickly.

There is speculation that the bank will lower it yet again at the next opportunity, on Wednesday. But that could push up house prices still further and encourage consumers to borrow even more.

So the government's main tactic for dealing with the slowdown seems to be hope. One possibility is that the slump in exports to the United States, by far the biggest foreign market, will prove to be temporary.

Cross argues that the recent drop was largely due to cold weather in the eastern United States and a dock strike in the west. If so, exports should pick up, lifting production and investment.

Harper must pray that happens soon. If it does not, he risks being unhorsed by angry voters.

Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.