Canada enters surprise technical recession

GDP declines 0.1% as trade uncertainty, tariffs and falling investment pressure economy

OTTAWA:

Canada's economy posted a surprise contraction in the first quarter versus the year before, making it two straight quarters of annualised decline – which some economists call a technical recession – as the country struggles with US tariff uncertainty.

Gross domestic product declined at an annualised rate of 0.1% in the first quarter, Statistics Canada said on Friday, compared with a downwardly revised contraction of 1% in the fourth quarter of last year.

Canada's economy has largely ?withstood trade uncertainty and tariff impacts for more than a year, but the knock-on effects of tariffs have sapped investments, hiring and expenditure, and driven up prices.

The upcoming review of the North American free trade deal and the crude price shock due to the Middle East war have added more layers of uncertainty.

The last two times Canada was in a technical recession were during the start of the pandemic in 2020 and during the oil shock in the beginning of 2015.

The Bank of Canada has said growth this year is likely to be at 1.2%, down from 1.7% last year. It will update its projections in July.

Business capital investment fell 0.7%, its fifth consecutive quarterly decline, StatsCan said.

On ?a monthly basis, GDP in March declined by 0.1%, against an estimate of flat growth.

An advance estimate from StatsCan showed that growth in April was likely to be 0.4%, highlighting a strong start to the second quarter.