Canada Enters Technical Recession in First Quarter, First Time Since 2020

Canada entered a technical recession in the first quarter, marking the first time since 2020.

Statistics Canada said on May 29 that real gross domestic product fell at an annualized rate of 0.1% in the first quarter, after a 1% contraction in the fourth quarter. That marked a second straight quarterly decline.

Bloomberg reported that the unexpected first-quarter GDP contraction ran counter to economists’ forecasts. It was the first time since 2020, during the Covid-19 pandemic, that Canada recorded negative growth for two consecutive quarters.

The Canadian dollar fell to an intraday low after the GDP data was released. Doug Porter, chief economist at Bank of Montreal, said the figures would cool discussion of additional rate increases. The economy is not in a position to absorb higher borrowing costs.

The Bank of Canada has kept its policy rate unchanged at 2.25% for four straight meetings. Bloomberg said the decision reflected an effort to look through the short-term inflationary effects of higher oil prices and focus on recession risks.