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Tag: Canadian business investment

  • Canada Enters Technical Recession After Economy Stalls in First Quarter of 2026

    Canada Enters Technical Recession After Economy Stalls in First Quarter of 2026

    Canada has officially slipped into a technical recession after the country’s economy recorded a second consecutive quarterly decline in real gross domestic product, according to new data released by Statistics Canada.

    The agency reported that economic growth was essentially flat during the first quarter of 2026, translating into an annualized decline of 0.1 percent in real GDP. The weak performance follows a revised one percent contraction in the fourth quarter of 2025, marking two straight quarters of economic decline.

    Economists widely view two consecutive quarters of negative growth as a technical recession, although analysts often examine the depth and spread of economic weakness before confirming a broader recessionary period.

    The latest figures came as a surprise to many market watchers, as economists had projected annualized GDP growth of 1.5 percent for the first quarter.

    According to Statistics Canada, several factors contributed to the slowdown, including weak construction activity, falling business investment, sluggish housing resale markets, and declining output from resource extraction industries.

    Imports of gold also weighed heavily on economic activity during the quarter, offsetting gains from increased business inventory accumulation.

    Business capital investment dropped for a fifth consecutive quarter, signaling continued caution among companies amid economic uncertainty.

    Monthly GDP data showed a 0.1 percent decline in March alone, driven primarily by weakness in construction and natural resource sectors.

    Despite the disappointing quarterly numbers, Statistics Canada noted that early estimates for April suggest a possible rebound, with real GDP projected to grow by 0.4 percent as mining, quarrying, oil, and gas sectors recover.

    The report also highlighted mixed signals within the broader economy. While expenditure-based GDP showed contraction, industry-based monthly GDP data suggested modest positive growth during the first quarter, reflecting differences in calculation methods and data sources.

    Canada’s population decline for a second straight quarter slightly boosted real GDP per capita, which rose by 0.2 percent during the first three months of the year.

    Economists are now closely watching upcoming economic data and central bank decisions to assess whether Canada’s economy can regain momentum in the months ahead.

  • Matthew Lau: Don’t Believe Freeland—Her Economic Plan Isn’t Working

    Despite Finance Minister Chrystia Freeland’s recent claim that the Bank of Canada’s interest rate cut “shows that our economic plan is working,” a closer look at the numbers reveals a different story. In fact, real GDP per capita has declined in seven of the last eight quarters, highlighting the weak economic performance under Prime Minister Justin Trudeau’s leadership. Since Trudeau took office, cumulative GDP growth has barely reached 0.6%, compared to the United States’ robust 16.4% over the same period.

    To put this into perspective, had Canada’s economy matched the U.S. growth trajectory since Trudeau became Prime Minister, Canadians would be 16% wealthier today. The interest rate cut, contrary to Freeland’s assertion, does little to suggest that the Trudeau government’s economic strategy is working. It’s more of a coincidence than an indication of success—like crediting a large breakfast for economic growth.

    Most entrepreneurs and investors would agree that the Liberal economic plan is failing. Real business investment per capita fell 5% year-over-year in the second quarter of 2024 and has plummeted more than 15% since the third quarter of 2015. And the worst might still be ahead—this sharp decline came before the impact of the Trudeau government’s capital gains tax hike, which went into effect at the end of June. The Liberals argue that this tax hike won’t hurt the economy except for the wealthiest, but this claim, like many others about the economy, is flawed.

    Public confidence in the government’s economic plan is also dwindling. While inflation has now moderated to under 3%, this does not undo the spike in consumer prices over the last few years. Today, the Consumer Price Index is 11% higher than it would have been had inflation followed its pre-2021 trend. The result is reduced affordability and growing financial insecurity for Canadians. According to a March poll by Abacus Data, 71% of Canadians said their household debt is rising, 65% expect a slow economic recovery, 52% feel financially unstable, and 74% believe housing affordability will only worsen.

    Freeland’s claim that “our economic plan is working” rings hollow for most Canadians. However, one group that seems to be benefitting from the Liberals’ economic management is the federal public service. Between 2015 and 2024, employment in federal departments and agencies ballooned by 43%, compared to a meager 12% rise in private-sector and self-employment. This includes a 48% increase in staffing at the Canada Revenue Agency, and a staggering 80% rise at Employment and Social Development Canada.

    It’s no wonder Canada is facing a productivity crisis. Despite Freeland’s optimism, Treasury Board President Anita Anand recently admitted that Canada is grappling with low productivity levels. The government has formed a working group to address this issue, but ironically, the federal government itself is an example of inefficiency. Canada Post posted its sixth consecutive annual loss in 2023, and mechanical failures recently left over 200 Via Rail passengers stranded for 10 hours without basic necessities.

    While Freeland continues to insist that the government’s economic plan is on the right track, the evidence paints a different picture. In fact, a poll from earlier this year found that 70% of Canadians believe “everything is broken in the country right now”—a sentiment that seems to echo the dysfunction of a stranded federal train .

     

    Sources:

    • Lau, M. (2024). “Matthew Lau: Don’t Believe Freeland—Her Economic Plan Isn’t Working.” National Post.