Canada has entered a technical recession after recording two consecutive quarters of economic contraction, signaling renewed pressure on its post-pandemic recovery.

Latest data shows real GDP fell by 0.1% in the first quarter of 2026, following a sharper 1.0% decline in the previous quarter. This marks two straight quarters of negative growth, commonly used as the benchmark for a technical recession.

The outcome came in sharply below expectations, as analysts had projected growth of around 1.5% for the quarter. Instead, economic activity weakened further across multiple sectors.

The slowdown is also being reflected in labour market conditions, which are showing signs of softening amid reduced business activity and external trade pressures.

Household finances have also come under strain, with the savings rate dropping to 3.5%, its lowest level in over two years, as consumer spending continues to outpace income growth.

Economists warn that continued weakness in growth, combined with external economic headwinds, could keep Canada’s economy under pressure in the near term.