Canada's Economy Slips into Shallow Technical Recession

Canada's economy has slipped into a shallow technical recession, with GDP falling at a 1.0% annualized pace in Q4 2025 and edging down a further 0.1% in Q1 2026.

However, the weakness is less alarming than it seems, as output was distorted by temporary factors such as a surge in gold imports and a slowdown in defence spending.

Final domestic demand has been resilient, with consumers acting as the main shock absorber for the economy.

The saving rate has fallen to 3.5%, leaving less cushion going forward, but consumer spending will likely struggle more in coming quarters due to higher gasoline prices eroding purchasing power.