Canada’s economy has fallen into what many economists describe as a technical recession after recording a second consecutive quarter of declining economic output.

Statistics Canada reported that real gross domestic product (GDP) contracted at an annualized rate of 0.1 per cent in the first quarter of 2026. The decline followed a revised one per cent contraction in the final quarter of 2025, marking two straight quarters of negative growth.

The latest figures came as a surprise to many economists, who had expected economic growth during the first three months of the year. Instead, weak business investment, lower government capital spending and softer export activity weighed on overall economic performance. Higher imports also contributed to the weaker GDP results.

Statistics Canada reported that economic activity was essentially flat on a quarter-to-quarter basis, but when converted to an annualized rate, the result showed a slight decline. Three of the last four quarters have now recorded negative GDP growth.

The slowdown comes amid ongoing uncertainty surrounding trade relations with the United States. Economists have pointed to tariffs and broader trade concerns as factors that have discouraged business investment and hiring while creating uncertainty for exporters.

The latest GDP figures are expected to be closely watched by the Bank of Canada as policymakers assess the country’s economic outlook. The data has also increased discussion about whether additional measures may be needed to support growth if economic weakness continues through the remainder of the year.