Prime Minister Mark Carney said Canada’s economy is being “fundamentally transformed” by his government as it responds to the U.S. trade war and that the country’s dip into a technical recession is partly a symptom of the economy’s “settling-in” period.
“This government’s been in the process of laying the foundations for a stronger, more resilient, more independent Canadian economy,” Carney said, on his way into a cabinet meeting on Tuesday.
“That process is settling in during that time as we make major investments, major changes to how the government operates, how we do major projects, how we have new trade agreements with other countries.”
Statistics Canada said Friday that real gross domestic product (GDP) declined 0.1 per cent on an annualized basis in the first quarter after a larger contraction in the last three months of 2025. Carney’s comments mark the first time he has spoken about the matter since the report’s release.
The second consecutive quarterly contraction meets the definition of a technical recession, but some economists as well as the Bank of Canada have cautioned against taking that news too strongly.
Carney says foundations for a stronger economy are ‘settling in’ amid technical recession
Carney said his government has made efforts to tackle economic headwinds by cutting immigration to flatten population growth and by reducing the rate of growth of government spending.
“It has been growing close to 10 per cent. It’s growing less than two per cent now,” he said.
BMO chief economist Douglas Porter said Friday that the economic weakness in the first three months of 2026 “was largely driven by a surprise decline in government spending and investment.”
“Government spending had been supporting growth the past few quarters, putting a floor under the economy, but that support wasn’t there in [the first quarter],” he said.
During that time, he said the economy faced other challenges like a 4.1 per cent drop in exports and a 3.6 per cent drop in business investment largely driven by trade uncertainty.
The prime minister said that while there is “choppiness in terms of how investment is happening,” investments in machinery and equipment, intellectual property and research and development are “up quite sharply” in the last six months.
Household incomes are “moving in the right direction,” continuing to increase faster than the rate of inflation, though he said there is “without question” more to be done.
Overall, Carney said the new economic foundation is “coming into place, settling in for that stronger, more resilient economy.”
Porter noted moderately strong consumer spending in the first quarter, up 1.5 per cent.
Still, he there is no “sugar-coating this sour result,” even if this recession is “in name only.”
On Monday, Bank of Canada senior deputy governor Carolyn Rogers had a different take. She told the House of Commons public accounts committee that while two quarters of annualized contraction in GDP does meet one definition of a recession, the economy most likely rebounded in April.
“I think we need to be careful not to put too much weight on any one indicator,” she told MPs.
In an analysis posted on Monday, Scotiabank chief economist Derek Holt also pushed back against the label.
Beyond the small size of the decline, he noted that harsh winter weather and tariff-induced trade swings were spurring volatility in the recent economic data.
He also wrote that imports of gold were also sharply higher in the first quarter, dragging GDP lower.
“It would be irresponsible to make a recession call on the basis of surging gold imports that are idiosyncratic in nature versus reflective of underlying activity in the economy,” he said.
Holt also pointed to ongoing consumer strength and early signs of an economic rebound in the second quarter.
“Overall, while I have no problem calling recession if there is merit to doing so, I find it would be irresponsible to do so in this case, and dwelling on a recession call risks causing one,” he said.
Carney ‘in hiding’ since Canada slipped into recession, Poilievre says
Every day since Statistics Canada published its first-quarter GDP results on Friday, Conservative Leader Pierre Poilievre has been hammering the Liberal government on the economic contraction.
Speaking on Tuesday, Poilievre said the contraction was “terrible news” for Canada compared to what is happening in other countries across the G7.
“The prime minister is once again failing the Canadian people by refusing to tell them the truth — that he caused a recession. It’s the only recession in the G7, the only recession in North America,” he said.
Poilievre has previously dismissed assessments putting caveats on the recession label as coming from “Liberal commentators and economists.”
He asked House Speaker Francis Scarpaleggia for an emergency debate on the country’s economic slide, but Scarpaleggia dismissed it.
The Conservatives have also introduced a motion to the House asking MPs to recognize that Carney caused the recession and to “immediately present a plan to reverse all the economic policies of the Liberal government which have given Canada the G7’s worst economy.”
