Canada Enters Technical Recession: Economy Shrinks for 2nd Quarter

Canada's economy has officially entered a technical recession, marking the first such occurrence since the pandemic. Statistics Canada reported that the economy contracted for a second consecutive quarter, with real GDP falling by 0.1 per cent in the first quarter of 2026. This follows a revised 1.0 per cent decrease in the fourth quarter of 2025. The downturn surprised economists who had anticipated growth.

The contraction was largely attributed to a significant increase in gold imports and a slump in the nation's resource extraction industries during March. While exports of crude oil and natural gas saw gains, these were negated by a sharp decline in passenger vehicle and light truck exports, influenced by U.S. tariffs. Business capital investment also declined for the fifth straight quarter, reflecting cautious corporate spending due to trade uncertainties.

Household spending showed resilience, particularly in financial services and food. However, this positive trend was offset by reduced business and government investment. Business owners are reportedly in a 'holding pattern,' lacking the confidence to invest amidst ongoing trade concerns. Some economists suggest that while the economy tipped into a technical recession, a rebound may have occurred in April, supported by rising oil and gas activity.