OTTAWA — Canada has entered what economists call a technical recession after the economy contracted for two consecutive quarters, sparking renewed political debate over the country’s economic direction and the challenges facing households and businesses.
A technical recession occurs when a country’s gross domestic product declines in back-to-back quarters. Statistics Canada reported the Canadian economy met that threshold, prompting opposition politicians to call for urgent action while the federal government urged Canadians to view the broader economic picture.
The latest economic data arrives as many businesses and consumers report growing concerns about affordability, investment and economic uncertainty.
A recent Merchant Growth survey found 71 per cent of Alberta small businesses believe Canada is either already in a recession or likely heading into one within the next 12 months. The survey also found many business owners are responding by cutting spending, delaying hiring, reducing inventory and putting expansion plans on hold.
According to the survey, 43 per cent of Alberta businesses have reduced spending, 21 per cent have paused or cancelled expansion plans and 14 per cent have delayed hiring. Fuel costs, insurance premiums, labour expenses and trade uncertainty were identified among the biggest concerns facing business owners.
The recession designation has become a focal point for the federal Conservatives, who are calling for an emergency debate in Parliament.
Conservative Leader Pierre Poilievre wrote to Prime Minister Mark Carney on Sunday urging the government to explain how it plans to reverse the economic downturn.
Poilievre argued the two consecutive quarters of contraction are supported by a range of other economic indicators, including job losses, declining business investment, rising insolvencies and increasing mortgage delinquencies.
In his letter, Poilievre said the recession is affecting families struggling with the rising cost of living and called on the government to present a plan for economic recovery.
The Conservatives point to more than 112,000 job losses during the first quarter of the year, five consecutive quarterly declines in business investment and growing pressure on household finances as evidence the downturn extends beyond a technical definition.
The federal government, however, is taking a more measured approach.
Prime Minister Mark Carney has acknowledged the economy is experiencing weakness but argues the situation should be viewed within the context of broader economic changes underway.
The government maintains its economic strategy remains focused on expanding trade beyond the United States, advancing major infrastructure and resource projects and positioning Canada for long-term growth.
Officials also point to indicators they view as encouraging, including business investment activity and household income growth that has outpaced inflation.
Many economists have similarly urged caution when interpreting the recession label, arguing the current downturn lacks some of the characteristics typically associated with a deep or prolonged recession. While economic output has declined, they note conditions remain mixed across different sectors of the economy.
For businesses and consumers, however, the debate over definitions may matter less than the day-to-day reality of rising costs and economic uncertainty.
The coming months will likely determine whether Canada’s recent economic contraction proves to be a temporary slowdown or the beginning of a more significant downturn.
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