Canada’s economy posted no growth in this year’s first quarter as U.S. tariffs and the war in Iran hampered the country’s output.
Statistics Canada said that real Gross Domestic Product (GDP) was unchanged in the first quarter of this year, after declining 0.2% in the fourth quarter of 2025.
The two consecutive quarters of no economic growth meets the technical definition of a recession and points to continued weakness in the Canadian economy.
In Q1, higher imports of goods were offset by accumulations of business inventories. At the same time, decreased business and government investments hurt Canada’s economic growth.
On a per capita basis, real GDP increased 0.2% in the first quarter of 2026, as the population declined for a second consecutive quarter.
Canada’s imports during the year’s first three months rose 2.9%, with half of that growth coming from metal products and scrap metal.
Exports declined 0.1% in the first quarter after rising 1.6% in the fourth quarter of last year. The decline in the first quarter was led by fewer exports of passenger cars and trucks, which have been heavily impacted by U.S. tariffs.
Business inventories built up in the first quarter as the manufacturing sector added to inventories after posting significant withdrawals late last year.
Capital investments from private sector companies fell 0.7% in the year’s first three months, the fifth consecutive quarterly decline.
Additionally, government capital investments fell 2.5% in the first quarter after exhibiting strength throughout 2025.
Compensation of employees across Canada increased 1.2% in the first quarter. Despite this fact, the household saving rate slowed to 3.5%, the lowest rate since the first quarter of 2024.
The Bank of Canada can be expected to closely scrutinize the latest GDP data as it prepares to make its next decision on interest rates June 10.
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