Canadian economic data made international news Friday as the latest reading of gross domestic product earned mentions from everyone from investing guru Mohamed El-Erian to the Wall Street Journal.
Canada’s GDP doesn’t often attract such attention, but this time a second quarter of contraction raised the red flag of “technical recession.”
Conservative leader Pierre Poilievre seized on the data, accusing Prime Minister Mark Carney of being the only G7 leader to send his country’s economy into recession and calling for an emergency debate.
The numbers were certainly a surprise. The 0.1 per cent decline in GDP in the first quarter shocked observers who had been expecting growth closer to 2 per cent. ‘Historically unusual,” is how Nathan Janzen, assistant chief economist at the Royal Bank of Canada, described it.
Luckily, economists say there is more to a recession than just two quarters of negative growth — namely the 3 Ds — depth, duration and dispersion.
This decline is not even close on depth — amounting to just 0.6 per cent annualized over the two quarters, “barely a scratch in GDP terms,” said Robert Kavcic, senior economist at BMO Capital Markets in a note.
In the past three Canadians recessions, outside the pandemic, the average decline at the weakest point was 5.3 per cent.
Nor is weakness widespread across the economy. The trade war has hit manufacturing, trade and real estate hard, but other sectors like finance, resources and health care are growing, said Kavcic.
Though exports are down, domestic demand has been climbing, and consumer spending has continued to rise.
Duration, he concedes, is getting close. The Canadian economy has been soft since the start of the trade war in early 2025, posting three negative quarters out of four.
However, there is one key variable in this equation that should not be overlooked and when viewed through its lens paints a very different picture of Canada’s economy, say economists — population.
Since the federal government cracked down on immigration after the post-pandemic boom, population has actually declined in Canada over the past two quarters.
So while the overall GDP reading is slipping, GDP per person is on the rise, a welcome change from a few years back when the per capita measure was nose-diving.
GDP per capita fell by almost 2.5 per cent in just over a year in 2022 and 2023, and plunged again in 2025, even as headline GDP was growing. The latest data showed GDP per person picked up by an annualized 0.9 per cent in the first quarter of 2026.
“That’s a better outcome for how individual households experience the economic backdrop compared to, for example, the ostensibly respectable GDP increases in 2023/2024 that actually represented persistent declines on a per-capita basis,” said Janzen.
Make no mistake, the Canadian economy remains fragile and faces more uncertainty in coming months as review of the Canada-United-States-Mexico Agreement gets underway.
But as economists at National Bank of Canada said Friday: “We are not ready to bandy about the ‘R’ word, at least not yet.”
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Looks like the loonie is a petrodollar no longer.
When oil prices fell on hopes of a U.S. deal with Iran to open the Strait of Hormuz, the Canadian dollar held up surprisingly well. That’s because the currency has a new commodity anchor — gold , says National Bank of Canada chief economist Stéfane Marion.
While the correlation between the Canadian dollar and WTI has weakened, the correlation with bullion has surged to the point where it now even surpasses the link with Canada-U.S. 2-year yield spreads, his chart shows.
“Oil still matters for Canada, but in the current market configuration, gold appears to be the more relevant marginal driver, helping explain why CAD is appreciating even as crude retreats,” said Marion.
“Gold’s rally is doing more of the heavy lifting for CAD.”
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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff and Bloomberg.
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Posthaste: Recession, what recession? Canada's economy is doing better than it has in years by this measure
2026-06-01 12:07:29
