Canada has entered back-to-back quarters of GDP decline, and concerns are raising about the economy as this meets the definition of a technical recession.
Data released by StatCan last week revealed that Canada’s gross domestic product (GDP) has declined for two quarters in a row, which meets the technical definition of a recession.
Canadians voiced their concerns and shared how they are coping financially to The Brandon Gonez Show.
“[I’m] checking my balance pretty much on a daily basis, and seeing like how I can basically get by this month. But it’s just like, going to stores on a daily basis and see constant price increases. It makes me feel worried, like I don’t know where Canada is going,” Alex L. shared to The Brandon Gonez Show.
Many are sacrificing basic needs to get by because it is becoming harder to afford things like groceries, especially in a household with more than one person. Canadians are forced to downsize and change their living habits to adjust to the country’s rising costs.
“I’m on maternity leave right now, actually. So financially, it’s always a bit of a hardship when you’re on maternity leave, so then to have a recession at the same time, it’s stressful,” Tiffany S. shares.
“We’ve gone through this before, so it’s just being patient and kind of grinding through it during this tougher time, and knowing that it’s going to get better eventually,” she adds.
The Brandon Gonez Show spoke with Angelo Melino, a professor of economics at the University of Toronto, about what this means for Canada’s economic reality.
What is a technical recession?
According to Melino, the definition of a recession comes from the U.S. National Bureau of Economic Research (NBER), which looks at different economic indicators to determine if an economy is growing or contracting.
In order to do that, the NBER came up with a “rule of thumb” as a quick way of guessing whether the economy is contracting, and this rule of thumb consists of two quarterly declines in GDP.
Per this definition, Canada is now in a technical recession, as the latest data from StatCan found that GDP has dropped 0.1 per cent in the first quarter of 2026, after it already dropped one per cent in the last quarter of 2025.
How is a technical recession different from a real recession?
Although GDP decline is one of the factors taken into account to determine whether the economy has shrunk or grown, Melino explained that economists look at a variety of factors before determining if there is an actual recession.
In order to determine a real recession, Melino said experts analyze not only whether there was a decrease, but also how pronounced and persistent the decrease was, and whether it is widespread across the country’s economy or kept to specific industries.
“For example, in 2015 there was a decline in overall GDP, but it was very much concentrated in the energy sector, it didn’t really spread beyond that, and so at that time the [Business Cycle Council (BCC)] decided that wasn’t a real recession,” he explained.
In addition, Melino explains that the data released by StatCan is only a preliminary estimate, and might change over the next few months. It also must be analyzed in addition to other data before economists can define whether there is an actual recession.
“These numbers change as we get more information, and the current estimate is for a very modest decline in the first quarter, something which there’s a 50/50 chance that it’ll go away when we get better data,” he said. “So calling [Canada] in a technical recession is premature.”
“If it turns out to not change, and a year from now, when we have much better data, we’ve decided it really did decline for two quarters. Then there’ll be a discussion as to whether or not it was deep enough…It’s too soon to call.”
How does this affect Canadians?
Although many across the country struggle with high cost of living, groceries, housing, and more, Melino said the label of “technical recession” doesn’t change much for everyday Canadians.
“At the end of the day, the Canadian economy is not doing terribly well, and there are lots of things that are making us nervous,” he said.
“You’re crossing a line, and [whether] we’re on one side of the line, or the other side of the line, doesn’t mean the things are dramatically different, it’s just a mark.”
What could be driving economic decline?
As explained, several factors go into defining a recession. So, it is tricky to point to one specific factor that might have driven the GDP down.
Melino said the current global economic uncertainty, including tariffs imposed by the U.S. President Donald Trump, the U.S.-Iran war, and CUSMA negotiations, has had an impact on Canada’s economy.
In addition, certain governmental decisions such as reduction in immigration levels and less governmental spending might also have had an impact. These have also been pointed out by Prime Minister Mark Carney, who acknowledged to reporters earlier this week that there has been “some weakness” in the economy due in part to government decisions.
“There’s no doubt that all the G7 economies, except for the United States, are doing poorly…This is not something that’s just in Canada. The fact that we were the only ones to get a negative reading, even though it was small, probably reflects more about immigration and population growth than anything else,” he said.
“But policy matters, and the outcomes of the negotiations of the United States are going to be the most important things that are going to matter.”
Will it continue to decline?
Melino said it’s still too soon to determine whether Canada’s GDP will continue to decline or if it will reverse back up anytime soon. Between the state of global economic turmoil, the ongoing war, and negotiations with the U.S., he said it is possible things will take a turn.
In addition, with more data coming up throughout the year, the economist said the GDP decline might even be retracted.
“The measurement errors in GDP are 2.5 times what the estimated decline was, so that might go away too. It might end up being much more serious, but it might even go away. So, in terms of how we measure the economy, it’s too soon to tell.”
With the ongoing global and economic uncertainty, it is too soon to determine what the economy will be like in the next while.
