Canada Faces Technical Recession as Economic Growth Stalls in Q1

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Statistics Canada reports a stalled economy in the first quarter, marking a second consecutive decline in real GDP, with implications for various sectors, including construction.

OTTAWA — Statistics Canada has released a report indicating that the Canadian economy stagnated during the first quarter of the year, resulting in a second consecutive decline in real gross domestic product (GDP). This development aligns with certain definitions of a technical recession, although StatCan’s findings provided a nuanced view of the overall economic situation. According to the report, real GDP by expenditure remained relatively unchanged on a quarter-over-quarter basis. However, when adjusted to an annualized rate — a figure that economists closely monitor — it reveals a decrease of 0.1 percent in real GDP for the first quarter. This follows a more significant decline of one percent in the fourth quarter of 2025, a figure that StatCan revised downward on May 29, 2026. Notably, three of the last four quarters in Canada have now experienced negative growth in real GDP. Prior to the report, economists had anticipated a 1.5 percent growth in real GDP on an annualized basis for the first quarter. The report highlighted that increased imports of gold negatively impacted economic activity during this period, although this was somewhat balanced by a surge in businesses accumulating inventory. Furthermore, business capital investment has now declined for five consecutive quarters, and sluggish resale activity in the housing market also contributed to the dismal first-quarter figures. StatCan attributed the 0.1 percent decline in real GDP in March primarily to weaknesses in Canada’s resource extraction industries and construction activities. The contractions in the last two quarters were chiefly driven by declines in real GDP recorded in October and March, while growth remained either flat or slightly positive in the months in between. Despite two consecutive quarters of negative growth meeting the criteria for a technical recession, many economists consider the overall breadth and severity of a downturn before officially declaring a recession. Preliminary estimates for real GDP in April suggest a significant recovery, with a 0.4 percent growth anticipated for the month, as the mining, quarrying, and oil and gas sectors began to rebound. These figures are slated for revision in the following month. Adding complexity to the economic landscape, monthly data used to track real GDP by industry indicates that growth was marginally positive in the first quarter, contrasting with the annualized contraction reported in real GDP by expenditure. Such discrepancies between these two economic measures are not uncommon, as they utilize different data sources and methodologies to derive their final figures. Additionally, StatCan noted a 0.2 percent rise in real GDP on a quarterly basis during the first three months of the year, despite a continued decline in Canada’s population for a second consecutive quarter.

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