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Canada’s economy showed little growth at the start of 2026, raising fresh questions about whether the country has slipped into a technical recession.
Statistics Canada reported that the economy was essentially unchanged in the first quarter, following a decline in the final quarter of 2025. GDP also slipped 0.1% in March, though an early estimate points to a 0.4% rebound in April.
That has left economists debating how much weight to put on the recession label.
BMO chief economist Douglas Porter said there will be "plenty of debate” over whether the latest figures qualify as a recession, adding that BMO’s view is "no, not really.”
Porter noted the first-quarter decline was very small and could potentially be revised away. Still, he said there is "little debate that the economy has struggled to make any headway over the past year.”
What economists are watching now
Oxford Economics struck a more cautious tone, saying Canada remains on "recession watch” after the economy unexpectedly dipped in the first quarter and has now contracted in three of the past four quarters.
Oxford said the weak result was partly driven by a surge in gold imports, weaker housing investment and a pullback in government investment after a large increase late last year. But it also pointed to falling business investment as a concern, especially as the economy faces pressure from oil prices, U.S. tariffs, trade uncertainty and a shrinking population.
TD economist Andrew Hencic said the disappointing first-quarter result "likely overstates the weakness in the economy,” partly because trade was a large and noisy drag on growth. He also noted that the strong early estimate for April suggests growth should rebound in the second quarter.
Still, TD said the Canadian economy continues to operate below capacity and is "flirting with a technical recession.”
For borrowers, the bigger question is what this means for interest rates.
Porter said the report should "throw a wet blanket on rate-hike talk,” adding that the economy "is in no condition to deal with higher rates.”
TD’s view is that if the economy continues to operate below capacity, and if the latest inflation shock fades, the Bank of Canada will likely remain on the sidelines.
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