Economists Call Time Out on Recession Talk in Canada

By Paul Vieira

OTTAWA--Canada's economy is struggling. But let's not call it a recession, economists say.

The recession chatter in Canada shifted into high gear after Friday's data indicating Canada's gross domestic product surprisingly fell in the first quarter by 0.1% annualized--marking a second consecutive quarter of economic contraction. The previous quarter had posted a 1% drop, and the shock first-quarter print missed market and Bank of Canada expectations by a wide margin. Traders scaled back expectations for Canadian rate hikes in the aftermath of the GDP data.

Back in 1974, U.S. economist Julius Shiskin said two straight quarters of negative GDP represents a simple definition of a recession, or what's now deemed a so-called technical recession. "The simplicity of Shiskin's definition means that it is at best a rule of thumb, and one that is subject to false positives and negatives," Neil Shearing, chief economist at Capital Economics, said in a 2023 analysis about what defines a recession.

In Canada, the responsibility for declaring recessions is left to the Toronto think tank C.D. Howe Institute and its Business Cycle Council, performing a task akin to the National Bureau of Economic Research in the U.S. Steven Ambler, the co-chairman of the think tank's council, said the eight-member panel is about to start discussions on whether the R-word now applies in Canada.

Ambler, a retired economics professor and a C.D. Howe residence-in-fellow, said in an interview that the present economic struggles in Canada don't meet the council's criteria of a "pronounced, persistent and pervasive decline" in aggregate economic activity.

"If you want to make the case that the economy is not doing that well, you can certainly do it without invoking the R word," said Ambler, adding that he was speaking in his capacity as co-chairman and not for the panel. Ambler said he cringes at the use of the term, technical recession. "The adjective technical sort of gives the recession call an official imprimatur," he said.

Ambler is likely not alone in his view among panel members. Another panelist is the chief economist at National Bank of Canada, Stefane Marion. His team of economists say the recession label is premature in part because a sharp slowdown in population growth is weighing on aggregate GDP. On a per-capita basis, National Bank said per-capita GDP has been on an upward trend for about two years, or when Canadian officials started to slow down their immigration intake.

According to the C.D. Howe council, the last time Canada was in recession was in the spring of 2020, or during the apex of the Covid-19 pandemic.

Ambler said that, in his view, the recession talk among some commentators and politicians has been misguided. For starters, he cited C.D. Howe data that show on a three-month average there are more components of the economy expanding than contracting.

Ambler added that the first-quarter drop of 0.1% on an annualized basis, "was smaller than most rounding errors," which could be revised higher at a later date. On a non-annualized basis, first-quarter output was mostly unchanged. The Statistics Canada figures indicate that GDP fell in the January-to-September period to 2.500 trillion Canadian dollars, or the equivalent of US$1.800 trillion, from the previous quarter's C$2.501 trillion level.

Robert Kavcic, economist at BMO Capital Markets, calculated that the combined decline in the last two quarters was 0.6% annualized, "or barely a scratch in GDP terms." Statistics Canada also expects a sharp rebound in GDP in April, of 0.4% from the prior month.

Write to Paul Vieira at paul.vieira@wsj.com

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June 01, 2026 10:25 ET (14:25 GMT)