Canadian economic data will be volatile as the government works on a broader transformation of the economy, Prime Minister Mark Carney said in response to last week's gross domestic product report that showed the country tipped into a technical recession.
Carney Comments on Economic Weakness
"This government's been in the process of laying the foundations for a stronger, more resilient, more independent Canadian economy," Carney said. "As we do all that, the data is going to be uneven."
Statistics Canada reported last week that the economy shrank at an annualized rate of 0.1 per cent in the first quarter, following a one per cent contraction in the fourth quarter. Conservative Leader Pierre Poilievre has been prosecuting the government over the results, accusing Carney of overseeing the only recession in the Group of Seven.
Carney weighed in on the data for the first time on Tuesday, saying that some of the weakness in the economy is due to the government's own policies, including its immigration cuts and slower growth in federal spending relative to recent years.
"So you have these crosscurrents as the economy is being fundamentally transformed," Carney told reporters.
U.S. President Trump Weighs In
United States President Donald Trump also weighed in on Monday, sharing on social media a Bloomberg story on Canada's GDP data and writing, "51st State!"
Economists Avoid Recession Label
While the latest data suggests the economy is weaker than expected as U.S. tariffs continue to batter some industries, economists have avoided the recession label, noting that a broader decline would have to be observed.
Bank of Canada Senior Deputy Governor Carolyn Rogers also cautioned on Monday against concluding the country is in a recession and said other economic data such as employment figures need to be taken into consideration.
Mixed Economic Signals
Dominique Lapointe, senior director of macro strategy at Manulife Investment Management, noted that while population growth has stalled, consumption actually rose in the past two quarters.
Business investment in machinery and equipment has risen modestly since the third quarter, but investment in non-residential structures continues to contract, he said in an email.
"At the same time, non-U.S. exports have risen but they don't offset the decline we've seen in the US. It's hard to find a sector that will propel growth in 2026 and 2027."
