Carney addresses technical recession, says economy going through 'settling-in' period

ground government minister german mark Carney said Canada's economic system is face of the earth "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 Tuesday in Ottawa.

"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 position 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 back 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.]"

During that time, 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, he said.

The prime minister said that while there is "choppiness in terms of how investment is happening," investments in machinery and equipment, research and development, and intellectual property 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 more to be done "without question."

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 online 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."

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."

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.

"Mark Carney has been gallivanting around giving speeches filled with dazzling buzzwords that achieve nothing but the worst economy in the G7," he said.

Poilievre also dismissed assessments pushing back 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.

Senior writer

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