OTTAWA — There was one word on the lips of many Canadians economists, politicians and journalists this past week: recession.
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THE CANADIAN PRESS/Frank Gunn - The Canadian PressOTTAWA — There was one word on the lips of many Canadians economists, politicians and journalists this past week: recession. Recent economic data has painted a mixed picture of Canada's economy, and some interpretations make the argument for a recession. Why are people talking about a recession? On May 29, Statistics Canada reported real gross domestic product figures for the first three months of the year.
The quarter-over-quarter change was so mild that StatCan considered it statistically flat, or no change in real GDP. But when economists are gauging the health of the economy in a given quarter, they often annualize quarterly figures, which can magnify small positive or negative changes in the numbers. The annualized change in real GDP was a 0.1 per cent decline, coming off a one per cent drop in the fourth quarter of last year.
Two quarters in a row of declining GDP is a bar used by some analysts to define a "technical" recession, though a number of economists consider the term unhelpful. Appearing before a parliamentary committee on Monday, Bank of Canada senior deputy governor Carolyn Rogers warned MPs against putting too much stake in that definition.
“Simply the fact that you have to put the term ‘technical' in front of it sort of tells you that you need to really look past that one indicator,” she said. The more widely accepted but nebulous definition of a recession refers to a downturn where Canada's economy is not just shrinking on a technical basis, but where that weakness is widespread through the economy.
Recessions are marked by job losses, households reining in spending and tough operating conditions for businesses across the economy.
"Two consecutive quarters of negative GDP growth, or contracting GDP, is necessary but not sufficient to call a recession in Canada or anywhere else," said Randall Bartlett, deputy chief economist at Desjardins. The federal Conservatives have seized on the latest GDP results, blaming Prime Minister Mark Carney and the Liberals for a "full-blown recession.
" In addition to stagnant GDP, Conservative Leader Pierre Poilievre and other MPs have pointed to rising food bank usage, consumer insolvencies and job losses in the first four months of the year to argue Carney's policies have damaged the Canadian economy. Liberals have meanwhile largely avoided using the word "recession" at all while defending their economic stewardship.
Carney acknowledged this week that the latest GDP figures show some "weakness," though he noted positive trends like rising business investment in machinery and equipment are encouraging. The prime minister argued that cuts to immigration and government spending are weighing on growth. He also said the work to pivot the economy away from reliance on the United States is going to take time to pay off, and economic data will be "uneven" while that unfolds.
Who decides if we're in a recession? A recession is not declared by the federal government, the Bank of Canada or any officially designated body. In Canadian economic circles, the traditional arbiter of a recession is the C.D. Howe Institute's Business Cycle Council.
It performs a similar function to the National Bureau of Economic Research in the United States. The council weighed in on the recession question Friday morning, arguing it was too soon to use the label to describe the state of Canada's economy. Declines in the economy must be pronounced, pervasive and persistent to be considered a recession, the think tank noted. This current downturn doesn't yet meet that bar, the Business Cycle Council determined.
StatCan's May 29 GDP report also expects the economy rebounded in April, setting the second quarter up for a return to growth. A week later, the agency reported a surprise gain of 88,000 jobs for May, which many economists said should pour cold water on recession talk. Gross domestic product refers to the total value of finished goods and services produced in a country over a given period. It's broadly used as a gauge of the economy's health.
StatCan said rising imports of gold and declining business investment were offset by higher household spending and firms stockpiling inventory, leaving first-quarter GDP flat compared to the previous three months. Bartlett said recent data is "idiosyncratic" from historical trends as the economy adjusts to U.S. tariffs and shifting geopolitical tides. He also said GDP is not a perfect measure of the economy and struggles with tracking services.
It can be volatile, and StatCan revises it initial reports regularly before landing on final figures months or years down the road.
"To hang your hat on one number that could easily be revised in either direction, either up or down, I think we need to see what these subsequent revisions look like to this data before we'd ever be comfortable making a call on a recession," he said. While GDP might not be a perfect measure, Concordia University economics professor Moshe Lander argues it's still worth tracking.
He compares it to his mother measuring his height by notching a mark on the door frame as he grew up — it's the trend that matters.
"Even though it's constantly revised, even though its riddled with flaws, and even though there is noise, what you do tend to find is that a lot of the things that do matter to us are highly correlated with this imperfect measure," Lander said. Rising GDP tends to mean businesses are producing more effectively, allowing them to raise wages.
A better economy also means more tax dollars are flowing up to federal and provincial governments, which in theory helps Ottawa and the provinces fund better services for Canadians. Real GDP per capita — measuring output on a per person basis — is sometimes used as a stand-in to measure whether quality of life is improving in a country.
Canada's growth in real GDP per capita has lagged the United States for years, though the metric was positive in the first quarter of 2026, partly reflecting a shrinking population. But measures like GDP, inflation and the unemployment rate are broad aggregates for the health of an economy and don't necessarily reflect an individual's experiences.
Lander said that makes relying on any one indicator an even more perilous venture for policy-makers and individual households trying to make sense of the economy.
"We're increasingly living in our microeconomic world, and GDP is fundamentally a macroeconomic variable. Because society is becoming a little more unequal, coming up with one number to try and describe that macro economy is becoming increasingly frustrating," he said.
"So when we say then that we entered a recession, I think there's a big pushback then from people saying, 'Uh, I feel like I've been in a recession for the last decade. '"
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