The Canadian economy is in a “vulnerable position,” according to at least one economist, and although the latest GDP data revealed a technical recession by some definitions, not all economists are ready to declare one formally just yet.
Statistics Canada said Friday that GDP in the first quarter of 2026 fell 0.1 per cent on an annualized rate, and follows a revised one per cent annualized decline in the fourth quarter of 2025. A technical recession is most commonly defined as two consecutive quarters with negative economic growth.
On a quarter-over-quarter basis, the agency says growth was essentially unchanged, but small movements in quarterly figures are magnified when converted into annualized rates. Real GDP declined last October and in March, but growth was either flat or positive in the four months in between.
“Don’t get me wrong, the economy has struggled to gain any meaningful traction over the last year … but for now, we wouldn’t necessarily call it a technical recession,” TD Bank economist Marc Ercolao said to The Canadian Press.
He said the decline in real GDP last quarter was still basically zero, and could easily be revised up in future Statistics Canada reports.
Friday’s release came as a surprise to some economists, who were expecting to see a positive result for the quarter.
“The Canadian economy continued to struggle in the first quarter, as GDP posted another decline,” said Katherine Judge at CIBC Economics in a statement.
“The 0.1 per cent annualized drop was in stark contrast to the consensus for a rebound to 1.5 per cent.”
Judge highlights how there were sizeable drops in business and residential investment as well as government spending. She adds that this was the fifth straight drop in business investment amid uncertainty brought on by trade war and U.S. tariffs.
“First-quarter growth was a disappointment. We’re certainly in a vulnerable position, with some of the key engines of growth beginning to sputter,” said principle economist Andrew DiCapua of the Business Data Lab and Canadian Chamber of Commerce in a statement.
“April shows some hope, but this does not set the economy up for the growth we had expected this year.”
The statement added: “The outlook remains choppy.”
Statistics Canada mainly blames higher imports of gold and a weak month for Canada’s resource extraction industries in March for dragging down recent economic activity.
Exports fell 0.1 per cent overall in the first three months of the year, even as Canada’s oil sector increased shipments of crude oil products and natural gas. Statistics Canada says declines in exports of passenger vehicles and lights trucks offset most of those gains as the sector continues to get hit by U.S. tariffs.
Conservative Leader Pierre Poilievre is blaming Prime Minister Mark Carney’s policies for Canada entering recession territory.
“The only way out of this Liberal recession is to reverse the policies that caused it in the first place,” he said Friday in the House of Commons.
“And that is why we are calling for the prime minister to get back in the House of Commons next week and introduce a bill to reverse all of the economic policies his party has introduced over the last decade.”
Friday’s release comes one day after the Bank of Canada said the economy is facing a “volatile” global environment and is vulnerable to shocks as households and businesses continue to struggle.
Bank of Montreal’s chief economist Doug Porter said in a note to clients that there was “no sense sugar-coating this sour result, as the economy has clearly been struggling to grow since the start of the trade war.”
“While there will be plenty of debate over whether this constitutes a recession (we would say ‘no, not really’), there is little debate that the economy has struggled to make any headway over the past year amid the ongoing trade conflict,” Porter said.
The agency’s early estimates for real GDP in April call for a sharp rebound to 0.4 per cent growth in the month as the mining, quarrying and oil and gas sectors returned to growth.
Friday’s data further cemented economists like Porter’s predictions that the Bank of Canada will likely keep interest rates where they are for the foreseeable future.
Porter said the soft first-quarter GDP figures should “really throw a wet blanket” over rate-hike talk in financial markets, “as the economy is in no condition to deal with higher rates.”
– With files from The Canadian Press
© 2026 Global News, a division of Corus Entertainment Inc.
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