What is a technical recession and what does it mean for Canadians?

Added: 2026-05-30

[00:00:00]Economists define a recession Faiza as two consecutive quarters, so six-month period of time, of negative economic growth. And these new numbers from Statistics Canada released this morning show that's where we are right now.

[00:00:13]Canada's real GDP in the first quarter of 2026, so January, February, March, declined by 0.1% on an annualized basis. That means if you extended that rate of growth across the year, that's what it would be. So, 1/10 of a percentage point. You add that to the -1% change in GDP in the last quarter of 2025, and voila, you've got two consecutive quarters of negative growth putting us into a recession, but by the slimmest of margin possible. This is now, although technically a recession, the first since a COVID-19 pandemic. And there's some debate about amongst economists whether or not this should really truly be considered a recession, but that's largely material because this is the numbers going in the wrong direction. And the real concern is that Canadian economy, you know, sharply underperformed against what was the Bay Street consensus. Economists in the private sector were all expecting a growth rate of 1.5% in this last quarter. Obviously, they were way off base. Why? Well, they say it's because of the trade dispute with the United States that is still going on and pulling down the total value of our exports. Canada had been handling the tariffs a pretty well in the early part of last year, but now they're starting to dig in and sort of the, you know, the the pass-through effects of all these tariffs are starting to spread throughout the larger economy, and that's bringing us into a negative period. Now, the higher prices of energy caused by the war in Iran also could be playing a role in this in terms of sort of consumer confidence and business confidence, but that could be where the good news is because Canada is still effectively a petrol economy. When the price of oil goes up globally, that brings in more money in revenues to Canada, our economy tends to do well. So, it's possible because we've seen these high oil prices and we don't know what's going to happen in Iran for the rest of, you know, the rest of the year, but right now it's looking like they're going to be stay stay higher for several months at least.

[00:02:21]But, what does this mean though for Canadians about beyond the gas pump?

[00:02:24]Well, certainly guarantees that there's going to be no increase to interest rates when the Bank of Canada sets its key policy rate that's scheduled for June 10th. That announcement, they are very likely to keep the rate set at the current 2.25%.

[00:02:39]That's going to be reassuring, I think, to anyone who's renewing a mortgage in the next year or who is on a variable mortgage rate. But, politically way more interesting, of course, the R-word, recession, very loaded politically, and this is great news for Pierre Poilievre and the Conservatives because they've been hammering Carney on his approach to the economy. Poilievre coming out having a press conference this afternoon that hadn't been previously scheduled. And then, we've got response also from the Finance Minister, François-Philippe Champagne.

[00:03:09]Listen to what they both had to say at different times earlier today.

[00:03:13]>> Mark Carney is now the only leader in the G7 to have plunged his economy into recession.

[00:03:22]He's been Prime Minister for four quarters now.

[00:03:25]The economy has shrunk in three of those quarters.

[00:03:28]He's the only G7 leader who can say that.

[00:03:32]>> We have made generational investments to support workers. We have made investments to support Canadians in terms of affordability. Mr. They can shout as much as they want. Canadians know that we have their back.

[00:03:45]>> Now, it's quite possible that Statistics Canada will revise the growth figure for the first quarter. They often do that.

[00:03:52]They come back and change past based on new data that comes in cuz all the data that they get has to take some time to accumulate and process. So, it's possible that our recession will be very, very brief. Nevertheless, I think those kind of exchanges you're hearing Poilievre blaming Carney's economic policies, putting a lot of blame on the industrial carbon tax that remains, as well as some of the federal rules about resource development. He continues to attack Carney for that. I think that's going to be kind of the dominant political story we're going to see Pfizer for the next couple couple months. Lots more exchanges like that.