Canada has entered a technical recession as economic growth stalled in the first quarter of 2026, according to Statistics Canada. This marks the second consecutive quarter of decline in real gross domestic product (GDP), meeting the definition of a technical recession. While the data paints a mixed picture, the overall trend indicates a weakening economy.
Real GDP was essentially unchanged in the first quarter, with an annualized rate showing a decline of 0.1 per cent. This follows a revised drop of one per cent in the fourth quarter of 2025. Three out of the last four quarters have now seen negative real GDP growth in Canada. The agency's early estimates suggest a rebound in April, with a projected 0.4 per cent growth as the mining, quarrying, and oil and gas sectors return to growth.
The economic slowdown is attributed to several factors, including higher imports of gold and a weak performance in Canada's resource extraction industries in March. Business capital investment has also fallen for the fifth consecutive quarter, and weak resale activity in the housing market contributed to the decline. Despite the contraction, domestic demand improved, with increased spending from governments, consumers, and businesses. However, this was offset by the using up of inventories and a decline in residential investment.
Economists had initially expected a growth of 1.5 per cent for the first quarter. The Bank of Canada's latest economic forecast projects a GDP increase of 1.2 per cent for this year, followed by 1.6 per cent next year, and 1.7 per cent in 2028. The central bank anticipates that the conflict in the Middle East will impact the composition of growth, but expects the overall impact to be small.
