Canada's economy shrank 0.1% on an annualized basis in the first quarter, marking two straight quarters of decline and meeting the technical definition of a recession. Statistics Canada reported the contraction follows a revised 1.0% drop in the fourth quarter, though quarterly figures showed no change. The last such period occurred during the pandemic's onset in 2020.

Higher imports dragged on growth, while inventory buildup provided partial offset. Household spending rose on financial services and food purchases, but business investment fell 0.7% for its fifth consecutive quarterly decline. BMO chief economist Douglas Porter called the recession label debatable given the minimal contraction, suggesting it could be "easily revised away."

Government capital spending dropped 2.5%, and Porter attributed the broader economic weakness to ongoing trade war pressures. Business confidence remains low as owners adopt a "holding pattern" approach amid rising energy costs and economic uncertainty.

April growth rebounded to 0.4%, offering hope that the contraction may prove temporary. Despite market expectations of rate hikes, Porter argues the GDP declines across three of the past four quarters eliminate any justification for tighter monetary policy. The Bank of Canada forecasts 1.2% growth this year, down from 1.7% in 2025.