Canadian Economy Stalls Amid Trade Uncertainty

Canada's economy has slipped into a technical recession, but it's not as alarming as the headline suggests. According to recent data, GDP fell at a 1.0% annualized pace in Q4 2025 and edged down further by 0.1% in Q1 2026.

The weakness is concentrated in trade-exposed sectors and regions, with a distorted picture due to temporary factors such as a surge in gold imports and a slowdown in defence spending. However, final domestic demand has remained resilient.

Household spending has been the main shock absorber for the economy, but this support is unlikely to be durable. The saving rate has fallen to 3.5%, leaving less cushion going forward.