Canada's economy contracted in the first quarter on an annualized basis by a slim margin, marking the second consecutive quarter of such decline — which some would call a technical recession.

Statistics Canada said real gross domestic product fell 0.1 per cent on an annualized basis in the first three months of this year. That comes after a downwardly revised contraction of one per cent in the fourth quarter of 2025.

Two consecutive quarters of contraction in economic growth is termed a technical recession.

However, on a quarterly basis, the first quarter GDP was unchanged against ​a decline in the fourth quarter of last year, closely ​escaping the definition of a technical recession on a quarter-on-quarter basis.

The annualized GDP figure scales up the quarterly figure to show what the GDP would be if the economy kept the same pace for the whole year, whereas the quarterly figure looks at the sheer number.

The last time Canada was in a technical recession was during the start of the pandemic in 2020. Before that, it was during the oil shock at the beginning of 2015.

At that time, there were two consecutive quarters of decline both on an annualized basis and quarterly basis, Statistics Canada said.

Given the difference between the annualized and non-annualized figures, BMO chief economist Douglas Porter said whether the technical recession label fits will be a matter of debate.

He points out that the dip in the first quarter is very small, meaning it could be "easily revised away."

WATCH | Is this a technical recession?:

An advance estimate from StatsCan also showed that growth in April bounced back to 0.4 per cent, which Porter says is also major glimmer of hope. Regardless, there are some clear signs of struggle in the economy that can't be sugar-coated.

"It's quite possible this, you know, could be a statistical mirage. But what I don't think is a debate is that we've basically seen the next to no growth over the past year," Porter told CBC News.

"And that, of course, continued in the first quarter of this year."

Porter noted that a big dip in government spending (government capital investments fell 2.5 per cent in the first quarter) explains some of the change. In the bigger picture, Porter says the past year of weakness can be pinned mostly on the trade war.

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

The first quarter GDP was negatively ⁠impacted by a high level of imports into the country but that was largely offset ⁠by a ⁠high accumulation of inventories, the statistics ​agency said.

Household spending, however, was a bright spot that added to the GDP — with Canadians spending more on financial services and food.

Business capital investment also fell 0.7 per cent in the first quarter of 2026, its fifth consecutive quarterly decline, StatsCan said.

Dan Kelly, president of the Canadian Federation of Independent Business, says that tracks, as many small business owners he represents have put investments on hold due to uncertainty in the economy and rising costs from things like energy, which has spiked thanks to the war on Iran.

Most businessses "are basically in a holding pattern, they're treading water, hoping for brighter days," Kelly said.

He adds the confidence in the economy that's needed to invest simply isn't there among business owners.

While markets are still predicting the Bank of Canada will raise interest rates before the end of the year, Porter says, today's bad GDP news should make that less likely.

"Even if we determine that this is just a recession in name only, the fact that we have seen declines in GDP in three of the past four quarters I think washes away any argument for rate hikes," Porter said.