After whipsaw reports through 2025, the first signals of 2026 might surprise
Canada has now met the technical definition of a recession: two quarters of consecutive negative GDP growth. On an annualized basis, Canadian GDP declined by 0.1 per cent in Q1 after a decline in Q4 of 2025,
Satistics Canada revealed on Friday morning that Canada's GDP was flat at 0.0 per cent for the first three months of the year. An increase in imports of 2.9 per cent dragged down GDP growth, while exports edged slightly lower. Real final domestic demand shrunk slightly by 0.1 per cent. On a per capita basis, real GDP increased 0.2 per cent due to another quarter of population decline.
Capital investment by businesses fell 0.7 per cent in Q1, the fifth consecutive quarterly decline. While there was a significant increase in mineral exploration and evaluation (27.9 per cent) there was a 4.6 per cent decline in engineering structures. There was also a decline of 2.0 per cent in business investment in residential structures, which StatCan attributes to weakness in resale housing activity.
Canadian households spent slightly more in Q1, with a rise of 0.4 per cent. Spending was higher on financial services and food, with declines in spending on trips and new vehicles. Employee compensation increased by 1.2 per cent in Q1. The household savings rate fell to 3.5 per cent, its lowest rate since Q1 of 2024.
This Q1 report follows initial estimates of a mild rebound after GDP contracted in Q4 of 2025. The agency predicted an annualized pace of growth of 1.7 per cent in Q1. Economists polled by Reuters estimated growth of 1.5 per cent. Last year saw significant changes in quarterly GDP reports, with annualized growth of 2.1 per cent in Q1, a decline of 0.9 per cent in Q2, growth of 2.4 per cent in Q3, and a 0.6 per cent drop in Q4. Much of that instability was attributed to US tariff policy.
