Carney addresses technical recession, says economy going through
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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.
While Canada’s economy has contracted for two straight quarters, slipping into a technical recession, Prime Minister Mark Carney said ‘the data’s going to be uneven’ as he makes changes to government operations, major projects and new trade agreements. ‘We see some weakness, in part because of clear decisions by the government,’ he said.
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.
Carney’s new economic foundation
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,”…
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